Fin204

Topics: Net present value, Depreciation / Pages: 9 (2195 words) / Published: Jun 22nd, 2013
FIN204 Investment Analysis & Decision Making Assignment 02 Tran Van Trung Hieu Batch 09 E1000125

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(Office Use Only)
ASSIGNMENT FOLDER

SUBJECT CODE: FIN204

STUDENT NO: E1000125

Date received
(Office Use Only)

STUDENT NAME: TRAN VAN TRUNG HIEU

PROGRAMME: Year 2, term 2

INTAKE:

Subject Name: Investment Analysis & Decision Making | Assignment Number: 2 | Due date of assignment: 15 April 2013 Submission date: 3 June 2013 |

DECLARATION: I declare that

* No part of this assignment has been copied from any other person’s work except where due acknowledgement is made in the text, and * No part of this assignment has been written for me by any other person except where such collaboration has been authorized by the lecturer concerned.

Signature………………………………………….Date………..………………………

N.B. * The examiner has, and may exercise the right not to mark this assignment if the above declaration has not been signed. * If the above declaration is found to be false, no mark will be awarded for this assignment.
QUESTION 1:
Maplewood Creations is considering the purchase of a new truck to replace an old truck that has a book value of $2,500 and a market value of $800. The annual depreciation expense on the old truck was $500. The new truck, which will cost $29,000, will reduce operating costs $9,000 per year over it 's 6 year economic life. The new truck has a 5-year MACRS life and an estimated salvage value at the end of 6 years of $2,000. If Maplewood has a 40 percent marginal tax rate and a cost of capital of 12 percent, what is the NPV of the new truck? Use the Depreciation schedule listed below:
(5-Year depreciation Schedule: 20%, 32%, 19%, 12%, 12%, 5%)
Answer:
Year | 0 | 1 | 2 | 3 | 4 | 5 | 6 |

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