Answer to Question #345119 in Civil and Environmental Engineering for KAYE

Question

A new municipal refuse collection vehicle can be purchased for P84,000. Its expected useful life is 6 years, at which time the Salvage Value (SV) and Book Value (BV) will be zero. Before-tax Cash Flow (BTCF) will be +P18,000 per year over the 6-year life of the vehicle.

a.    Use straight-line (SL) depreciation, an effective income tax rate of 40% and an after-tax MARR of 12% to determine the present worth of the investment.

b.    Is this vehicle a sound investment? Explain your answer.

Answer 1

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