A firm is considering the purchase of a truck for $200,000 fully installed. It is expected to last 3 years with a salvage value of $50,000 at that time. Annual revenues are expected to be $300,000 in the first year and to grow thereafter at an annual rate of 5%. Annual operating and maintenance costs are expected to be $100,000 in the first year and to grow thereafter at an annual rate of 3%. 1. Depreciate the truck using the DB method (d=25%) 2. The half-year rule does not apply. 3. The before-tax with inflation interest rate is 20%. 4. The before-tax inflation-free interest rate is 15%. 5. The after-tax with inflation interest rate is 10%. 6. The after-tax inflation-free interest rate is 5%. 7. Inflation is 5% annually. 8. The tax rate = 50% The firm gets a $100,000 loan (at a 10% rate of interest) which is repaid as follows: Loan Repayment at End of Year Percentage of Loan Repaid 20% 30% 50% 3 Years Item 3 2 BB 1. BTCF (Actual $) 2. BTCF (Constant $) 3. Interest on Loan -200,000 CC DD EE 4. Depreciation 5. Taxable income 6. Taxes Payable 7. ATCF (Actual $) 8. ATCF (Constant $) 9. Repayment of Loan 3. Interest on Loan 10. CFOE (Actual $) 11. CFOE (Constant $) GG 12. The dollar value of AA is a) 200,000 b) 200,000(1+0.05)-1 c) 200,000(1+0.10)2 d) 200,000(1+0.15)-3 13. The dollar value of BB is a) 300,000(1.05)-100,000(1.03)-1 b) 300,000-100,000 c) 300,000(1.05)-100,000(1.03) d) 300,000(1.05)--100,000(1.03)-1 14. The dollar value of CC is a) -200,000 b)-200,000(1+0.05) C) -200,000(1+0.05)-1 d) -200,000(1+0.05) 2 e) None of the above answers. Answers are below. Please show the steps to obtaining them thanks! 12) A 13) C 14) A A firm is considering the purchase of a truck for $200,000 fully installed. It is expected to last 3 years with a salvage value of $50,000 at that time. Annual revenues are expected to be $300,000 in the first year and to grow thereafter at an annual rate of 5%. Annual operating and maintenance costs are expected to be $100,000 in the first year and to grow thereafter at an annual rate of 3%. 1. Depreciate the truck using the DB method (d=25%) 2. The half-year rule does not apply. 3. The before-tax with inflation interest rate is 20%. 4. The before-tax inflation-free interest rate is 15%. 5. The after-tax with inflation interest rate is 10%. 6. The after-tax inflation-free interest rate is 5%. 7. Inflation is 5% annually. 8. The tax rate = 50% The firm gets a $100,000 loan (at a 10% rate of interest) which is repaid as follows: Loan Repayment at End of Year Percentage of Loan Repaid 20% 30% 50% 3 Years Item 3 2 BB 1. BTCF (Actual $) 2. BTCF (Constant $) 3. Interest on Loan -200,000 CC DD EE 4. Depreciation 5. Taxable income 6. Taxes Payable 7. ATCF (Actual $) 8. ATCF (Constant $) 9. Repayment of Loan 3. Interest on Loan 10. CFOE (Actual $) 11. CFOE (Constant $) GG 12. The dollar value of AA is a) 200,000 b) 200,000(1+0.05)-1 c) 200,000(1+0.10)2 d) 200,000(1+0.15)-3 13. The dollar value of BB is a) 300,000(1.05)-100,000(1.03)-1 b) 300,000-100,000 c) 300,000(1.05)-100,000(1.03) d) 300,000(1.05)--100,000(1.03)-1 14. The dollar value of CC is a) -200,000 b)-200,000(1+0.05) C) -200,000(1+0.05)-1 d) -200,000(1+0.05) 2 e) None of the above answers. Answers are below. Please show the steps to obtaining them thanks! 12) A 13) C 14) A