Question
A tractor for over-the-road hauling is to be purchased by AgriGrow for $84,000. It is expected to be of use to the company for 6
A tractor for over-the-road hauling is to be purchased by AgriGrow for $84,000. It is expected to be of use to the company for 6 years, after which it will be salvaged for $3,600. Transportation cost savings are expected to be $150,000 per year; however, the cost of drivers is expected to be $60,000 per year, and operating expenses are expected to be $49,000 per year, including fuel, maintenance, insurance, and the like. The companys marginal tax rate is 25 percent, and MARR is 10 percent on after-tax cash flows. Suppose that, to AgriGrows surprise, they actually dispose of the tractor at the end of the fourth tax year for $5,600. Develop tables using a spreadsheet to determine the ATCF for each year and the after-tax PW, AW, IRR, and ERR after only 4 years.
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