Question

Problem:  The owner of a pizza shop is considering buying a new delivery vehicle.  A new vehicle would result in a savings of $8,000 per year over the old vehicle.  The new vehicle would cost $25,000 and would have a useful life of eight years, at which time it would be sold for $2,500.  The owner uses a 20% before-tax MARR, and the vehicle would be depreciated by using MACRS.  Should the owner purchase the van on an after-tax basis?  Use a 40% tax rate.

Answer 1

i think owner should purchase new vehicle because the benefits he'll get would ultimate please him with the profitability in business and with savings too:

first he will get savings of 8000 per year which can be proved as later handsome investment in the business of pizza

second he will get new life of 8 years of vehicle which probably be an life span benefit

third is when owner wanna to sell that vehicle he will get a lump-sum in hand

rather after tax may be works best