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FIN - Tabletop Ranches, Inc.

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Question;Tabletop Ranches, Inc. is considering the purchase of a new helicopter for $325,000. The firm's old helicopter has a book value of $85,000, but can only be sold for $60,000.The new helicopter will be subject to 25 percent CCA. It is expected to save $62,000 for 7 years through reduced fuel and maintenance expenses. There is no salvage value. Tabletop Ranch is in the 40% tax bracket and has a 12% cost of capital.Calculate the net present value of the helicopter purchase and state whether or not the firm should buy it.Time Event Cash flow Aftertax cash flow Present Value

 

Paper#48395 | Written in 18-Jul-2015

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