13 The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota4Runners for company principals. The purchase price for the Ford Explorer will be $30,750. Annualmaintenance costs for the Explorer are expected to be $575 per year more than that of the 4Runner.The purchase price for Toyota 4Runners is 35,250 The trade-in values after 3 years are estimated tobe 50% of the first cost for the Explorer and 60% for the 4Runner. (a) What is the incremental RORbetween the two vehicles? (b) Provided the firm's MARR is 15% per year, which vehicle should it buy?a) The incremental ROR between the two vehicles is 5.14%.b) The firm should buy Ford Exploreras the incremental ROR is less thanthe MARR.

Minimum Acceptable Rate of Return or the hurdle rate is referred to as the minimum rate of return on…

Answered: The CFO of a consulting engineering…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter23: Corporate Restructuring

Section: Chapter Questions

Problem 11P

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