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Congratulations, you recently inherited a farm, and decided to purchase a new road-safe tractor unit for $90,000. You plan on keeping the tractor unit for
Congratulations, you recently inherited a farm, and decided to purchase a new road-safe tractor unit for $90,000. You plan on keeping the tractor unit for the next four years, at which time you will sell it for its salvage value of $10,000. Over these four years, you expect annual revenues due to the new tractor to 30,000 per year. Assuming a tax rate of 40% and a MARR of 7% Calculate the annual depreciation and book value of the tractor, for each of the four years, using the following methods: SL (assume nonMACRS SL method) DB (200%) GDS Using the GDS depreciation calculated in part a), convert your annual BTCFs to ATCFs. Using the ATCFs calculated in part b). calculate the PW of this purchase. Is this a good investment
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