an additional seven delivery trucks | My Assignment Tutor

10:36UManitobauniversityofmanitoba.desire2learn.comCHI would also need to purchase anadditional seven delivery trucks forthe incremental deliveries. The truckswould cost $100,000 each and wouldrequire $10,000 each in insuranceannually. Transportation variablecosts (gas, truck driver salaries, etc.)are estimated to be 15% ofincremental revenue.The expansion is expected to cost$9,000,000 which will be fullycapitalized to the balance sheet. Anadditional $1,000,000 will also needto be spent on production equipmentfor manufacturing purposes. Mr. Starkwants to see if the project will reachprofitability after 6 years, so he wantsyou to evaluate the return oninvestment in that period using theinvestment criteria of payback period,discounted payback period, NPV, IRR,and profitability index. The followingtable will help in the calculations ofthe tax shield for each of the assets:ClassCCA RateDescription4330%Machine andequipment tomanufacture andprocess goods forsale4 니41030%Automobilespanel truckstrucks, tractors,trailers110%Buildings thatuse at least 90%of square footageformanufacturing &processingincluding theexpansion ofthese buildingsTax Shield Formula:(1 + 0.5 xDisInitial Investment x CCA rate x Tax Rateх(Discount Rate + CCA rate)[14 4 0 5 Xpe


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