Laura wants to buy a delivery truck. The truck costs $117,000 , and will allow her to increase her after tax profits by $18,000 per year for the next 10 years. She will borrow 72% of the cost of the truck for 10 years, at an interest rate of 7%. Laura's unlevered cost of capital is 89% and her tax rate is 20%. The loan includes a S2,000 application fee. What is the NPV of buying the truck on these terms?

Laura wants to buy a delivery truck. The truck costs $117,000 , and will allow her to increase her after tax profits by $18,000 per year for the next 10 years. She will borrow 72% of the cost of the truck for 10 years, at an interest rate of 7%. Laura's unlevered cost of capital is 89% and her tax rate is 20%. The loan includes a S2,000 application fee. What is the NPV of buying the truck on these terms?

Excel Applications for Accounting Principles

4th Edition

ISBN:9781111581565

Author:Gaylord N. Smith

Publisher:Gaylord N. Smith

Chapter27: Time Value Of Money (compound)

Section: Chapter Questions

Problem 6E

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