A market vendor wants to buy a new mobile kitchen. This kitchen costs 40,000 euros and is depreciated on a straight-line basis over 5 years. After 5 years the kitchen can be sold for 5000 euros. The mobile kitchen raised 7000 euros in the first year and it is increased by 500 euros every year. The mobile kitchen also has maintenance costs per year. The first year costs 1500 euros and after that the price increases by 250 euros per year. The tax rate is 34%. The market vendor does not find money useful. He is happy with 1.5% profitability. The market vendor does not think about the actualization foot. (5) a) Is this investment a good investment? In the way of the market vendor. Explain. b) And if one uses a discount rate of 5%. Explain.

A market vendor wants to buy a new mobile kitchen. This kitchen costs 40,000 euros and is depreciated on a straight-line basis over 5 years. After 5 years the kitchen can be sold for 5000 euros. The mobile kitchen raised 7000 euros in the first year and it is increased by 500 euros every year. The mobile kitchen also has maintenance costs per year. The first year costs 1500 euros and after that the price increases by 250 euros per year. The tax rate is 34%. The market vendor does not find money useful. He is happy with 1.5% profitability. The market vendor does not think about the actualization foot. (5) a) Is this investment a good investment? In the way of the market vendor. Explain. b) And if one uses a discount rate of 5%. Explain.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter9: Capital Budgeting And Cash Flow Analysis

Section: Chapter Questions

Problem 10P

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