You have been asked to evelatute (cost justify) the aquistion of a new truck for use in your company. The truck will cost $100,000 and will require $20,000 of modifications to make it ready for use. The truck has a 5 year useful life and yoru company uses MACRS for depreciation. You anticipate using the truck for 2 years and then selling it for $65,000. During the 2 years of operations, you project revenues of $75,000 and operating expenses of $25,000. Your target weights are 50% for long term debt and 50% for common equity (no short term debt or preferred stock are used by the business. Your anticipated gross rate on long term debt is 9.00%. Your firm's most recent annual dividend was $8,500,000 and the Total Common Equity is $50,000,000. Your company income tax rate is 40%. Base on the above...
(1) What is the Capital Investment?
(2) What is the Accumulated Depreciation After Two Years
(3) What is the Salvage Value of the Truck?
(4) What are the Year 1 and 2 Operating Cash Flows?
(5) What is the Weighted Average Cost of Capital?
(6) What is the NPV of the Project (discounted at the WACC)?