Heavy duty truck

by | Jul 5, 2021 | Assignment

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 ROI

Calculate Payback

Calculate NPV and make a decision. what’s the most you would pay?

Will IRR be more or less than the hurdle rate?

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