You are trying to pick th

You are trying to pick th

You are trying to pick the least-expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $19,000 to purchase and which will have OCF of ?$2,200 annually throughout the vehicle?s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $29,000 to purchase and which will have OCF of ?$1,150 annually throughout that vehicle?s expected 4-year life. Both cars will be worthless at the end of their life. You intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future.Your company is considering a new project that will require $1,015,000 of new equipment at the start of the project. The equipment will have a depreciable life of 9 years and will be depreciated to a book value of $160,000 using straight-line depreciation. The cost of capital is 12 percent, and the firm?s tax rate is 35 percent.You have been asked by the president of your company to evaluate the proposed acquisition of a new special-purpose truck for $60,000. The truck falls into the MACRS 3-year class, and it will be sold after three years for $20,900. Use of the truck will require an increase in NWC (spare parts inventory) of $2,900. The truck will have no effect on revenues, but it is expected to save the firm $20,300 per year in before-tax operating costs, mainly labor. The firm?s marginal tax rate is 35 percent.

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