Syracuse Road building Company is considering the purchase of a new tandem box dump truck. The truck costs $95,000, and an additional $5,000 is needed to paint it with the firm logo and install radio equipment. Assume the truck falls into the MACRS three-year class. The truck will generate no additional revenues, but it will reduce cash operating expenses by $35,000 per year. The truck will be sold for $40,000 after its five-year life. An inventory investment of $4,000 is required during the life of the investment. Syracuse Road building is in the 45% income tax bracket.
1. What is the net investment?
2. What is the after-tax net operating cash flow for each of the five years?
3. What is the after-tax salvage value?
4. Assuming a 10% cost of capital, what is the NPV of this investment?
Please give detailed examples, how the problem was solved, what functions was used in excel, etc. Thank you!
The solution explains how to calculate the cash flows for the project and its NPV