Q3.A construction company has bought a hoist for $ 70,000 and has a useful life of 4 years. The scrap value of this device is estimated at $ 30,000 after 4 years. The device is depreciated as a sum of years. Assuming the device has an annual revenue of $ 18,000, an inflation rate of 12 percent, a profit tax rate of 35 percent, and a minimum attractive company return rate of 18 percent considering inflation, is it justified to buy this device? Isit acceptable?

Q3.A construction company has bought a hoist for $ 70,000 and has a useful life of 4 years. The scrap value of this device is estimated at $ 30,000 after 4 years. The device is depreciated as a sum of years. Assuming the device has an annual revenue of $ 18,000, an inflation rate of 12 percent, a profit tax rate of 35 percent, and a minimum attractive company return rate of 18 percent considering inflation, is it justified to buy this device? Isit acceptable?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter10: Capital Budgeting: Decision Criteria And Real Option

Section: Chapter Questions

Problem 3P

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