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

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deliveries. The transmission needs to be replaced and there are
several other repairs that need to be done. The car is nearing the
end of its life, so the options are to either overhaul the car or
replace it with a new car. Pompeii's has put together the following
budgetary items:
Present Car
New Car
Purchase cost new
$31,000
Transmission and other repairs
$8,000
Annual cash operating cost...

Fairfax Pizza is considering buying a new oven. The new oven
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Fairfax Pizza is considering buying a new oven. The new oven
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years, the oven would be sold for an after-tax cash flow of 2,600
dollars. Without the new oven, costs are expected to be 12,300
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Fairfax Pizza is considering buying a new oven. The new oven
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depreciated straight-line to 1,200 dollars over 2 years. In 2
years, the oven would be sold for an after-tax cash flow of 2,600
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would be purchased today for 21,200 dollars. It would be
depreciated straight-line to 1,800 dollars over 2 years. In 2
years, the oven would be sold for an after-tax cash flow of 2,800
dollars. Without the new oven, costs are expected to be 13,800
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would be purchased today for 16,800 dollars. It would be
depreciated straight-line to 1,200 dollars over 2 years. In 2
years, the oven would be sold for an after-tax cash flow of 2,000
dollars. Without the new oven, costs are expected to be 12,000
dollars in 1 year and 16,800 in 2 years. With the new oven, costs
are expected to be 800 dollars in 1 year and 12,000...

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would be purchased today for 17,800 dollars. It would be
depreciated straight-line to 1,200 dollars over 2 years. In 2
years, the oven would be sold for an after-tax cash flow of 1,800
dollars. Without the new oven, costs are expected to be 11,200
dollars in 1 year and 19,400 in 2 years. With the new oven, costs
are expected to be -400 dollars in 1 year and 15,800...

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depreciated straight-line to 2,200 dollars over 2 years. In 2
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