Question 7

JKL Enterprises plans to purchase a new delivery truck for $80,000. The truck will reduce operating costs by $15,000 annually and will be depreciated straight-line over 8 years. The truck has no salvage value. The tax rate is 40%, and the company’s cost of capital is 8%. Calculate:

1. Annual depreciation expense.
2. Annual after-tax savings.
3. Net Present Value (NPV).
4. Internal Rate of Return (IRR).
5. Payback Period.