Question
8. Jane lives in Thredbo. She is planning on starting her own snow plowing business where she is paid to clear private roads and parking
8. Jane lives in Thredbo. She is planning on starting her own snow plowing business where she is paid to clear private roads and parking lots. She can purchase a new truck with a snow plow already mounted on the front for $50,000. After a year of use, she figures that she can still sell the truck and plow for $45,000. To buy the truck, she needs to borrow funds from her local bank. They will lend her the funds for an interest rate of 5%. (a) At what rate does Jane expect the capital to depreciate? (b) se the information provided to derive the cost of owning the truck for the year? (You must show your work to receive credit.) (c) Provide a brief description of the logic of the derivation in part 8b. (d) According to profit maximizing rule of investment, if each snow clearing job pays $500, how jobs would Janes snow plowing business have to fill in the first year in order to make the purchase a good idea?
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