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A company is considering a temporary expansion of its trucking operations. In real terms, it expects to generate $400,000 in each of the next two
A company is considering a temporary expansion of its trucking operations. In real terms, it expects to generate $400,000 in each of the next two years while incurring operating costs of $260,000 annually. Trucks (Class 10 - 30%) worth $160,000 would be required over the two year project and it is expected that the trucks could be sold for their book value at the conclusion of the project. The money needed for the trucks would have to be borrowed and a bank has agreed to provide a loan at a 7% interest rate that would be paid back in two equal installments at the end of years one and two. If the tax rate is 40%, the MARR in real terms is 10%, and the inflation rates in years 1 and 2 are 5% and 3% respectively, determine the annual after tax cash flows and calculate the present worth of this project
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