In: Accounting
ABC Company is considering the purchase of a new garbage truck ON 1/1/20. The truck will cost $40,000 and have useful life of 5 years with a salvage value of $0. The new truck is much more efficient than the old delivery truck and should increase the company’s annual cash operating income by $12,000. Straight-line depreciation will be used. The income tax rate is 25% and ABC Company’s hurdle rate is 10%. PRESENT VALUE TABLES ON THE EXAM’S LAST PAGE.
6. The Net Present Value (NPV) is equal to