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In: Accounting

5. A construction firm is evaluating the purchase of a new semi-trailer truck. The truck’s base...

5. A construction firm is evaluating the purchase of a new semi-trailer truck. The truck’s base price is $80,000, but the company will need to modify it at an additional cost of $20,000. The truck will be sold after three years for $30,000; and it falls into the MACRS five-year class. The purchase of this semi-trailer will have no effect on the firm’s revenues, but it is expected to save $45,000 per year in before-tax operating cost, mostly in leasing expenses. The company’s marginal tax rate (federal plus state) is 40%, and its MARR is 13%. Determine the following: a) Is this project acceptable, based on the most likely estimates given in the problem? Why yes or why not? b) What is the break-even interest rate for this project? c) Will the project be acceptable if the annual savings will be $40,000 instead of $45,000? Why yes or why not?

(IN excel with formulas please)

This problem will have to be solved by creating the Income and the Cash Flow Statements.

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Expert Solution

excel formulas

ekkarill92 answered 1 year ago
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