Fleet Fleet rental car company purchased 10 newcars for a

Chapter , Problem 12-51

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Fleet Fleet rental car company purchased 10 newcars for a total cost of $180,000. The cars generatedincome of $150,000 per yearand incurred operatingexpenses of $60,000 per year. The company usesMACRS depreciation and its marginal tax rate is40% (Note:Per IRS regulations, cars have a classlife of 5 years). The 10 cars were sold at the endof the third year for a total of $75,000. Assum-ing a MARR of 10% and using NPW, determineif this was a good investment on an after-tax basis.

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