Question

In the use of unmanned aerial vehicles (UAVs) that will shape the future of UAV applications,

an online shopping company has purchased a group of UAVs for $79000. The market value

is expected to decrease by $9000 per year. Also, the UAVs will be depreciated within a 5

years. As cargo drones are a proven technology for the logistics industry, it is expected that the

purchase of the group of UAVs will increase the company’s revenue by $10000 annually.

Although, there is an expectation about the related operating expenses to be $39500

annually

to operate fee-charging UAV services at certain times, the online shopping company’s effective

income tax rate of is 40%, and its after-tax MARR is 15% per year. The company decides to

use the cargo drones for 5 years to simplify the transportation of goods while offering faster,

more environmentally friendly service than the alternative.

a) (20 points) What would be the equivalent after-tax annual worth of this investment?

b) (20 points) Is this investment profitable? Write your comments about your results.

Answer 1