O’Brien Salvage is considering the purchase of a new heavy duty truck. This truck will be picking up scrap from large industrial manufactures throughout the suburban Chicago.
This is a market that O’Brien until recently has been unable to enter. Use the following data and answer the questions that follow. Initial Investment … 118,000Annual Revenue…..60,000Annual Cash Expenses 40,000Salvage Value 25,000Useful Life 10 years Hurdle rate 12%
What is the net cash inflow annually? how much in annual depreciation expense? how much in annual net income?
Calculate NPV and make a decision. what’s the most you would pay?
Will IRR be more or less than the hurdle rate?