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    Cash flow for Auto Parts Distribution, Inc

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    In order to expand its business, Auto Parts Distributing, Inc., is considering the purchase of 10 pickup trucks at a total cost of $150,000. The company expects to keep these trucks for four years, then sell them. The company expects these trucks to generate a pretax net cash flow of $75,000 in year 1, $70,000 in year 2, $65,000 in year 3, $60,000 in year 4, and to sell after four years for a total price of $30,000 fully taxable. The company's marginal tax rate is 36% and its cost of capital is 9%.

    a. After tax cash flow for each year 1 thru 4 =
    b. Payback period =
    c. Net Present Value =
    d. Internal Rate of Return =

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    Solution Summary

    The solution examines the cash flow for Auto Parts Distribution, Inc.