Question
Lemington Enterprises is considering a project to replace its fleet of 10 vehicles. The company makes a fleet replacement decision every five years. Its current
Lemington Enterprises is considering a project to replace its fleet of 10 vehicles. The company makes a fleet replacement decision every five years. Its current fleet of 10 vehicles was purchased five years ago at $50,000 each and can be sold for $10,000 each today. The new vehicles will cost $60,000 each and will bring cost savings of $100,000 per year. In five years, the new vehicles can be sold for $12,000 each. If the fleet is not replaced today, the current fleet will have no salvage value in five years time. The CCA rate on these vehicles is 30%, and the companys marginal tax rate is 35%. What is the PV(CCATS) for this replacement project, assuming a required rate of return of 10%? Round your answer to the nearest dollar.
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