#2 solve asap please Congratulations, you recently inherited a farm, and decided

Question

#2 solve asap please Congratulations, you recently inherited a farm, and decided to purchase a new road-safe tractor unit for $90,000! You plan on keeping the tractor unit for the next four years, at which time you will sell it for its salvage value of $ 10,000. Over these four years, you expect annual revenues due to the new tractor to be $30,000 per year. Assuming a tax rate of 40% and a MARR of 15%. Calculate the annual depreciation and book value of the tractor, for each of the four years, using the following methods: Using the GDS depreciation calculated in part a), convert your annual BTCFs to ATCFs. Using the ATCFs calculated in part b), calculate the PW of this purchase. Is this a good investment?

Explanation / Answer

This is not a good investment as it gives a negative Net present worth

Present Value = Cashflow / (1 + MARR) ^ number of year

Straight Line method Year Depreciation Book Value 0 % Amount 90000 1 22.22% 20000 70000 2 22.22% 20000 50000 3 22.22% 20000 30000 4 22.22% 20000 10000 DB method Year Depreciation Book Value 0 % Amount 90000 1 44.44% 39996 50004 2 44.44% 22221.78 27782.22 3 44.44% 12346.42 15435.80 4 44.44% 6859.67 8576.13 GDS method Year Depreciation Book Value 0 % Amount 90000 1 33.33% 29997 60003 2 44.45% 26671.33 33331.67 3 14.81% 4936.42 28395.25 4 7.41% 2104.09 26291.16 Year BTCF Tax ATCF MARR Present Worth NPW 0 -90000 40% 15% -90000 -65600.17 1 3 40% 1.8 15% 1.57 2 3328.67 40% 1997.1999 15% 1510.17 3 25063.58 40% 15038.14811 15% 9887.83 4 37895.91 40% 22737.54733 15% 13000.27

Related Questions

Navigate

• Browse (All)
• Browse #
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.