you have been asked by the president of your company to evaluate the proposed ac
ID: 2735660 • Letter: Y
Question
you have been asked by the president of your company to evaluate the proposed acquisition of a new special purpose truck. the basic price is 40,000 and it will cost another $20,000 to modify it. the truck will be depreciated over its three year life using straight line at a rate of $20,000 per year. an increase in net working capital is also expected of $5000. the truck is expected to save the firm $35,000 per year in operating expenses. the marginal tax rate is 40%. what is the net initial investment? you have been asked by the president of your company to evaluate the proposed acquisition of a new special purpose truck. the basic price is 40,000 and it will cost another $20,000 to modify it. the truck will be depreciated over its three year life using straight line at a rate of $20,000 per year. an increase in net working capital is also expected of $5000. the truck is expected to save the firm $35,000 per year in operating expenses. the marginal tax rate is 40%. what is the net initial investment? you have been asked by the president of your company to evaluate the proposed acquisition of a new special purpose truck. the basic price is 40,000 and it will cost another $20,000 to modify it. the truck will be depreciated over its three year life using straight line at a rate of $20,000 per year. an increase in net working capital is also expected of $5000. the truck is expected to save the firm $35,000 per year in operating expenses. the marginal tax rate is 40%. what is the net initial investment?Explanation / Answer
Iniial Investment = Price of the truck + Modification cost + Change in Net Working Capital
Therefore Initial Investment will be = $40,000+ $20,000 + $5,000 = $65,000
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