Lane Construction Lld. is considering the acquisition o( a new dump truck. The truck's base price is $75,000, and it will cost another $ 15,000 to modify it for special use by the company. This truck falls into the MACRS five-year class. It will be sold after five years for $20.000. ll1e truck purchase will have no effect on revenues. but it is expected to save the firm $35.000 per year in before-tax operating costs mainly in leasing expenses. TI1e firm 's marginal tax rate (federal plus stare) is 40%, and its MARR is 15%.(a) Is this project acceptable based on the most likely estimates given in theproblem?(b) If the firm 's MARR is increased to 20%, what would be the required savings in leasing so that the project would remain profitable?(c) If the projected savings figure is only $25,000, would you still recommend the project?
Lane Construction Lld. is considering the acquisition o( a new dump truck. The truck's base price is $75,000, and it will cost another $ 15,000 to modify it for special use by the company. This truck falls into the MACRS five-year class. It will be sold after five years for $20.000. ll1e truck purchase will have no effect on revenues. but it is expected to save the firm $35.000 per year in before-tax operating costs mainly in leasing expenses. TI1e firm 's marginal tax rate (federal plus stare) is 40%, and its MARR is 15%.
(a) Is this project acceptable based on the most likely estimates given in the
problem?
(b) If the firm 's MARR is increased to 20%, what would be the required savings in leasing so that the project would remain profitable?
(c) If the projected savings figure is only $25,000, would you still recommend the project?
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 2 images