question archive CP Industries is considering purchasing a new drilling truck
CP Industries is considering purchasing a new drilling truck
Subject:AccountingPrice: Bought3
CP Industries is considering purchasing a new drilling truck. The truck will cost $185,000 and generate revenues of $260,000 each year. The truck will cost $45,000 annually to operate and maintain and will require two new operators to be employed at a total cost of $110,000 per year. The truck will require a significant rebuild at the end of the fourth year that is expected to cost $45,000. The truck can be sold after 7 years for $15,000. CP uses a discount rate of 20% when making investment decisions.
Determine the Net Present Value of the truck purchase. Should CP purchase the truck? (Ignore tax effects)
