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ACC - Sensitivity Analysis - Lane Construction ltd




Question;Sensitivity Analysis: using excelLane Construction ltd. is considering the acquisition of a new eighteen wheeler.-The truck base price is $80,000 and it will cost another $20,000 to modify it for special use by the company.-This truck falls into MACRS five year class. It will be sold after three years for $30,000.-The truck purchase will have no effect on revenues, but it is expected to save the firm $45,000 per year in before-tax operating costs, mainly in leasing expenses.-The firm marginal tax rate (federal plus state) is 40%, and its MARR is 15%.(a) Is this project acceptable, based on the most likely estimates given in the problem?(b)If the firm?s MARR is increased to 25%, what would be the required savings in leasing so that the project would remain profitable?


Paper#40986 | Written in 18-Jul-2015

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