Table 4-2

Percentage by recovery year

Recovery Year 3 Years 5 Years 7Years 10 Years

1 33% 20% 14% 10%

2 45% 32% 25% 18%

3 15% 19% 18% 14%

4 7% 12% 12% 12%

5 12% 9% 9%

6 5% 9% 8%

7 4% 7%

8 6%

9 6%

10 6%

11 4%

11-3: Your company wants to replace the fleet of light-duty trucks for the truck leasing division, which began with a single purchase four years ago at a cost of $400,000. The fleet can be sold today for $130,000 and will be depreciated using MACRS, per Table 4.2. The new fleet will be purchased for $600,000, ready to go. The tax rate is 34%. Assume no change to net working capital for the replacement. (A) Determine the book value of the current fleet. (B) Determine the after-tax receipts from the sale of the existing fleet. (C) Determine the replacement project's initial investment