Joe and Tonya Rodeo are going to buy a new truck for their ranch. Relevant information about
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Question:
Joe and Tonya Rodeo are going to buy a new truck for their ranch. Relevant information about the two trucks is given below. If the after tax discount rate is 5%, which truck should they purchase? The original cost is paid out in year 0, the projected after tax cash flows are paid out each year. The salvage value is recouped in the final year.
(Hint: you need to do the least common denominator of time or an annual annuity equivalent.)
Truck A Truck B
Original cost $23,000 $19,000
Projected economic life 4 years 3 years
Projected after-tax annual cash flows $4,000 $3,800
Salvage Value $3,500 $3,000
Related Book For
South-Western Federal Taxation 2020 Comprehensive
ISBN: 9780357109144
43rd Edition
Authors: David M. Maloney, William A. Raabe, James C. Young, Annette Nellen, William H. Hoffman
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