Consider purchasing a $50,000 SUV that you expect to last for 10 years. The IRS uses a MACRS 5-year depreciation schedule on cars. It allows depreciating 20% in year 1, 32%, 19.2%, 11.52%, 11.52%, and 5.76% in the following years. You can finance this car yourself. You can produce income of $100,000 per year with it. Maintenance costswill be $5,000 per year. Your income tax rate is 30% per annum. Your cost of capital is 12% perannum.

What is the NPV of the car to you (the owner)? Answer: 342,168

Should buy or not?

Construct income and cash flow statements for this car.