Question
You run a plumbing company.You are experiencing a growth in your business, and find you don't have enough trucks and plumbers to meet the demand.You
You run a plumbing company.You are experiencing a growth in your business, and find you don't have enough trucks and plumbers to meet the demand.You are considering buying a new truck and then hiring an additional plumber to handle some of the work you have had to turn away.Based on the assumptions below, Capital Budgeting Analysis using the template provided .Assume you will sell the truck at the end of year 3.
Cost of the Truck $35,000.00
Truck Modifications $4,000.00
Sales Tax on Truck $2,750.00
Depreciation Method Straight Line
Useful Life of Truck in Years 5
Revenues $100,000.00
Plumber Wages $55,000.00
Gas for Truck $5,000.00
Insurance for Truck $750.00
Maintenance for Truck $1,200.00
Plumbing Supplies $5,000.00
Sale Price of Truck $20,000.00
Company Tax Rate 35.00%
NPV Discount Rate 7.00%
What is the Total Capital Investment?
What is the Book Value of the asset at the end of Year 2?
What is the Operating Cash Flow for Year 1?
What is the Salvage Value?
What is the NPV?
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
International Finance Theory and Policy
Authors: Paul R. Krugman, Maurice Obstfeld, Marc J. Melitz
10th edition
978-0133425895, 133425894, 978-0133423631, 133423638, 978-0133423648
