You run a plumbing company. You are experiencing a growth in your business, and find you...

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Accounting

You run a plumbing company. You are experiencing a growth inyour business, and find you don't have enough trucks and plumbersto meet the demand. You are considering buying a new truck and thenhiring an additional plumber to handle some of the work you havehad to turn away. Based on the assumptions below,prepare a Capital Budgeting Analysis using the template provided.Assume you will sell the truck at the end of year 3.
Cost of the Truck $35,000.00
TruckModifications $4,000.00
Sales Taxon Truck $2,750.00
Depreciation Method Straight Line
UsefulLife of Truck in Years 5
Revenues $100,000.00
PlumberWages $55,000.00
Gas forTruck $5,000.00
Insurancefor Truck $750.00
Maintenance for Truck $1,200.00
PlumbingSupplies $5,000.00
SalePrice of Truck $20,000.00
CompanyTax Rate 35.00%
NPVDiscount Rate 7.00%
What is the Capital Investment / Depreciable Basis?
What is the Book Value at the end of Year 2?
What is the Operating Cash Flow for Year 1?
What is the Salvage Value?
What is the Net Present Value (NPV)?

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4.0 Ratings (617 Votes)

Capital InvestmentDepreciable basis A 41750 Book Value at the end of year 2 F 25050 Operating cash flows at year 1 I 24700 Salvage value of truck at year 3 G 17269 NPV HA 17652 Workings Initial Investment Cost of truck 35000 Truck modifications 4000 Sales tax on truck 2750 Capital InvestmentDepreciable basis See Answer

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Cost of the Truck	$35,000.00
TruckModifications	$4,000.00
Sales Taxon Truck	$2,750.00
Depreciation Method	Straight Line
UsefulLife of Truck in Years	5
Revenues	$100,000.00
PlumberWages	$55,000.00
Gas forTruck	$5,000.00
Insurancefor Truck	$750.00
Maintenance for Truck	$1,200.00
PlumbingSupplies	$5,000.00
SalePrice of Truck	$20,000.00
CompanyTax Rate	35.00%
NPVDiscount Rate	7.00%