Question
A Canadian road-paving company bought a new dump-truck. The truck cost $35,000 to purchase and it will provide annual benefits of $9,000 per year. Operating
A Canadian road-paving company bought a new dump-truck. The truck cost $35,000 to purchase and it will provide annual benefits of $9,000 per year. Operating costs are estimated to be $2,500 per year. The truck will be used for 6-years and then sold for $18,000. The company uses an after-tax MARR of 8%, the truck falls into an asset class with a CCA rate of 20%, and the company's tax rate is 38%. a) Find the after-tax present worth of the dump-truck. Was it a good investment? (8-marks) b) For comparison, what would the company use as a 'before-tax' MARR? (2-marks)
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