You have been asked by the president of your company to evaluate the proposed acquisition of...

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck. The truck's basic price is $275,000, and it will cost another $25,000 to modify it for special use by your firm. The truck falls into the MACRS three-year class, and it will be sold after three years for

$50,000. Use of the truck will require an increase in net operating working capital

(spare parts inventory) of $25,000. The truck will have no effect on revenues, but it is expected to save the firm $125,000 per year in before-tax operating costs, mainly labor. The firm's cost of capital is 10% and the marginal tax rate is 35 percent. Should the company accept/reject the project?

NPV?

IRR?

MIRR?

Payback?

Decision?

Expert Solution

jeff jeffy answered 3 months ago

You have been asked by the president of your company to evaluate the proposed acquisition of...

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You have been asked by the president of your company to evaluate the proposed acquisition of...

You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $50,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $21,000. Use of the truck will require an increase in NWC (spare parts inventory) of $3,000. The truck will have no effect on revenues, but it is expected to save the firm $16,900 per year in before-tax operating costs, mainly labor....

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you have been asked by the president of your company to evaluate the proposed acquisition of...

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You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $20,600. Use of the truck will require an increase in NWC (spare parts inventory) of $2,600. The truck will have no effect on revenues, but it is expected to save the firm $20,200 per year in before-tax operating costs, mainly labor....

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You have been asked by the president of your company to evaluate the proposed acquisition of...

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