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Golden Bear Caf can either rent or buy forklifts. Renting cost is of $30,000 per year (including maintenance). Purchasing cost is of $100,000 at year
Golden Bear Caf can either rent or buy forklifts. Renting cost is of $30,000 per year (including maintenance). Purchasing cost is of $100,000 at year 0 and for all the following years, an additional $12,500 annual maintenance fee needs to be paid starting from year 1. The discount rate is 7% annually and the tax rate is 25%. Assume a forklift has a 5-year lifespan and will be depreciated using the straight-line method over that period (from year 1 to year 5). Please answer question 19-22 19. What is the Free Cash Flow per year of renting the forklifts? A. -$17,500 B. -$22,500 C. $22,500 D. $17,500 You may show your effort to Question 19 in the following box: 20. What is the Free Cash Flow at year 0 when buying the forklifts? A. -$75,000 B. -$100,000 C. 80 D. 8-12,500 You may show your effort to Question 20 in the following box: 21. What is the Free Cash Flow per year from year 1 to year 5 when buying the forklifts? A. -$9,375 B. -$12,500 C. -$24,375 D. -$4,375
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