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.
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 Capital Investment / Depreciable Basis?
What is the Book Value at the end of Year 2?
What is the Operating Cash Flow for Year 1?
What is the Salvage Value?
Based on the NPV, this project should be viewed as acceptable?
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