Question
You have been asked by the president of your company to evaluate the proposed acquisition of new special-purpose truck. The truck's basic price is P50,000
You have been asked by the president of your company to evaluate the proposed acquisition of new special-purpose truck. The truck's basic price is P50,000 and it will cost another P10,000 to modify it for special use by your firm. The truck has a useful life of 4 years and it will be sold after the 3rd year for P20,000. The applicable depreciation rates are 33%, 45%, 15% and 7%. Use of the truck will require an increase in net operating working capital of P2,000. The truck will have no effect on revenues, but it is expected to save the firm P20,000 per year in before tax operating costs, mainly labor. The firm's marginal tax rate is 30%. What is the net investment in the truck in Year 0?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started