Solution-What is the npv of buying the trucks

What is the npv of buying the trucks

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Reference no: EM132554927

If Omair decides to buy the 100 trucks he is estimating that he would be spending MYR 18000 per truck. And the question is how to finance. He was checking the debt market rates, and found out that for similar risk companies, the bonds with a face value of 1000 were trading at MYR 940 with 5 years to maturity (annual coupon payment of 5%).

Buying the trucks also means that he would be incurring a cost of MYR 85,000 each year for the whole fleet. The company's tax rate is 30%. The tax laws allow straight-line depreciation for 5 years. The cost of capital is the same as the cost of debt.

a) What is the npv of buying the trucks

Reference no: EM132554927

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What is the npv of buying the trucks

Reference no: EM132554927

Reference no: EM132554927

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