Question

In: Accounting

Pete Castillio, the owner manager of Kamloops Cab Company, is considering purchasing a new all electric...

Pete Castillio, the owner manager of Kamloops Cab Company, is considering purchasing a new all electric unit for his taxi fleet. Pete has been focusing on upgrading from his current reliable fleet of hybrid vehicles to fully plug in electric vehicles as he believes the reduced maintenance and increased reliability of these vehicles is a worthwhile venture. The electric automobile would cost $50,000 (CCA class 16 - 40%) and would have a salvage value of $2,500 as the current unit at the end of the fifth year. Based on his previous experience, he projects daily revenues of $375 from this new taxi unit and average operating costs of $4,600 per month for incremental fuel and maintenance expenses and $65,000 per year for a driver salary. Kamloops Cab Company maintains an average marginal tax rate of 35% and Pete expects a minimum after-tax return of 15% on his taxi investments. Required – submit your handwritten response via the assignment moodle dropbox to the following: 1) Compute the net present value of this investment. Show all details of your calculations. 2) Discuss any additional quantitative and/or qualitative issues of your analysis. .

Solutions

Expert Solution

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

Suppose a company has a forklift but is considering purchasing a new electric lift truck that...
Suppose a company has a forklift but is considering purchasing a new electric lift truck that would cost $230,000 and has operating cost of $25,000 in the first year. For the remaining years, operating costs increase each year by 5% over the previous year’s operating costs. It loses 15% of its value every year from the previous year’s salvage value. The lift truck has a maximum life of 4 years. The firm’s required rate of return is 5%. Find the...
Suppose a company has a forklift but is considering purchasing a new electric lift truck that...
Suppose a company has a forklift but is considering purchasing a new electric lift truck that would cost $3000000 and has operating cost of $50500 in the first year. For the remaining years, operating costs increase each year by 35% over the previous year’s operating costs. It loses 7% of its value every year from the previous year’s salvage value. The lift truck has a maximum life of 6 years. The firm’s required rate of return is 5%. Find the...
Suppose a company has a forklift but is considering purchasing a new electric lift truck that...
Suppose a company has a forklift but is considering purchasing a new electric lift truck that would cost $230000 and has operating cost of $25000 in the first year. For the remaining years, operating costs increase each year by 5% over the previous year’s operating costs. It loses 15% of its value every year from the previous year’s salvage value. The lift truck has a maximum life of 4 years. The firm’s required rate of return is 5%. Find the...
1. Suppose a company has a forklift but is considering purchasing a new electric lift truck...
1. Suppose a company has a forklift but is considering purchasing a new electric lift truck that would cost $230000 and has operating cost of $25000 in the first year. For the remaining years, operating costs increase each year by 15% over the previous year’s operating costs. It loses 12% of its value every year from the previous year’s salvage value. The lift truck has a maximum life of 5 years. The firm’s required rate of return is 5%. Find...
3. Chavez Company is considering purchasing new equipment or overhauling its existing equipment. The manager has...
3. Chavez Company is considering purchasing new equipment or overhauling its existing equipment. The manager has gathered the following information: Current machinery: Original cost $ 50,000 Accumulated depreciation 40,000 Annual operating costs 5,000 Current market value 1,500 Salvage value at the end of five years - Cost of overhauling machinery: Cost of overhaul $ 12,000 Annual operating costs after overhauling 2,000 Salvage value at the end of five years - New machinery: Cost $ 56,000 Annual operating costs 1,000 Salvage...
As a financial manager, you are considering purchasing a new machine that will cost $1 million....
As a financial manager, you are considering purchasing a new machine that will cost $1 million. It can be depreciated on a straight-line basis for five years to a zero salvage value. You expect revenues from the machine to be $700,000 each year and expenses are expected to be 50% of revenue. If the company is taxed at a rate of 34% and the appropriate discount rate for a project of this level of risk is 15%, will the company...
A manufacturing company is considering purchasing a 10 HP electric motor which it estimates will run...
A manufacturing company is considering purchasing a 10 HP electric motor which it estimates will run an average of 6 hours per day for 250 days per year. Past experience indicates that: (1) its annual cost for taxes and insurance averages 2.5% of first cost, (2) it must make 10% on invested capital before income tax considerations, and (3) it must recover capital invested in machinery within 5 years. Two motors are offered to the company. Motor A costs $...
Finning Corporation is considering purchasing a new trailer for its operations for $60,000. The Manager has...
Finning Corporation is considering purchasing a new trailer for its operations for $60,000. The Manager has put together an estimate of anticipated financials: Initial cost $60,000 Estimated useful life 8 years Annual Depreciation $4,500 Net annual cash inflows $10,990 Net annual cash outflows $ 3,000 Overhaul costs (end of year 4) $5,990 Salvage value $12,000 Prior to moving forward with the purchase, the owner of the company looked at the analysis and realized that there were some intangible benefits that...
A company is considering purchasing new equipment. The purchase of the equipment is       expected to...
A company is considering purchasing new equipment. The purchase of the equipment is       expected to generate after tax savings of $12,600 each year for 8 years. The company can       borrow money at 6%. Assume annual compounding.         Determine the present value of the future cash inflows. Hint: the $12,600 are your annuity payments
The purchasing manager of a distillery company is considering three sources of supply for oak barrels....
The purchasing manager of a distillery company is considering three sources of supply for oak barrels. The first supplier offers any quantity of barrels at `150 each. The second supplier offers barrels in lots of 150 or more at `125 per barrel. The third supplier offers barrels in lots of 250 or more at `100 each. The distillery uses 1,500 barrels a year at constant rate. Carrying costs are 40 percent of purchase price, and it costs the purchasing agent...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT