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Make an investment decision about whether a $60,000 automobile should be purchas Assume the automobile to be purchased will have a six-year productive life and n value. !t will produce income of $"#,000 for the first three years before deduct depreciation and taxes. !n the last three years, the income before depreciation $" ,000, $"%,000, and $"&,000, respectively. 'urthermore, assume a tax rate of % of capital of "0( for the analysis. )int* +se the method described in the lectur a hat is the cash flow enerated each year b hy is this automobile depreciated in 6 years c +sin the present value factor table below, what is the net present value d should the automobile purchase be recommended based on the financial analysis /ear resent value factor 1"0( " 0.202 & 0.3#6 % 0.4#" 0.63% # 0.6&" 6 0.#6

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Make an investment decision about whether a $60,000 automobile should be purchased or not. Assume the automobile to be purchased will have a six-year productive life and no salvage value. It will produce income of $15,000 for the first three years before deductions for depreciation and taxes. In the last three years, the income before depreciation and taxes will be $14,000, $13,000, and $12,000, respectively. Furthermore, assume a tax rate of 35% and a cost of capital of 10% for the analysis. Hint: Use the method described in the lecture.a) What is the cash flow generated each year?b) Why is this automobile depreciated in 6 years?c) Using the present value factor table below, what is the net present value?d) should the automobile purchase be recommended based on the financial analysis?

YearPresent value factor (10%)

10.909

20.856

30.751

40.683

50.621

60.564