Question
Eat at State is considering buying a new food truck. It will cost $65,000 but is expected to generate $20,000 in annual sales over the
Eat at State is considering buying a new food truck. It will cost $65,000 but is expected to generate $20,000 in annual sales over the next 4 years. At the end of the 4th year, the truck will be sold to Eat Like a Wolverine in Ann Arbor for $5,000 (after taxes). It will require $15,000 in additional Net Working capital that will not be recovered when the truck is sold. The Dean of Food Services will only authorize the purchase if it is cash positive by the end of the 4th year. Using the discounted payback period method, should the truck be purchased, and why?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started