Question - O'Brien Salvage is considering the purchase of a new heavy duty truck. This truck will be picking up scrap from large industrial manufactures thoughout 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 ... 118,000
Annual Revenue.....60,000
Annual Cash Expenses.....40,000
Salvage Value..................25,000
Useful 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?