Question

use excel and show functions

MISIULUIS (12-14) A construction equipment rental company can purchase a new crane for $1,125,000 which is expected to last for 25 years. The expected salvage value at that time is $147,000. The annual rental income from the crane is $195,000. Using straight-line depreciation and a MARR of 15%, a) What is the present worth of the after-tax cash flow for this equipment? b) Should the company invest in this crane? in 1.9 online olan 2 on Decayed ang ulo 161.90. The anal en les con

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

ДА В 2 4 Initial Cost Annual rental income Salvage value Life of crane (years) MARR Sah $1,125,000.00 $195,000.00 $147,000.00 25 15% 8 a) Present worth of equipment $139,974.58 b) Yes, Company should invest in this Crane as it has positive net present value.

Cell reference -

B -Nm Initial Cost Annual rental income Salvage value Life of crane (years) MARR 1125000 195000 147000 25 0.15 8 a) Present worth of equipment =PV(C6,C5,-C3,-C4,0)-C2 000 b) Yes, Company should invest in this Crane as it has positive net present value.

Please note- Tax rate is not provided in question thus, Depreciation tax shield ignored in above question.

Hope this will help, please do comment if you need any further explanation. Your feedback would be highly appreciated.