14. Morrison Vans is considering the purchase of a new vehicle to replace an old...
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14. Morrison Vans is considering the purchase of a new vehicle to replace an old one. The old vehicle originally cost $40,000, but has been fully depreciated and now has a current market value and book value of zero. It is estimated that the proposed new vehicle generates efficiencies and savings of $16,000 per year before tax. The new vehicle costs $60,000 delivered and installed, and its economic life is estimated to be ten years with no salvage value. Morrison's cost of capital is 14% (discount rate); depreciation is on a straight-line basis; and the total corporate tax rate is 40%. a. What is the Payback Period for the investment in the new vehicle? b. What is the Net Present Value (NPV) of the investment in the new vehicle? c. What is the Internal Rate of Return (IRR) of the new vehicle? d. What is the Profitability Index (PI) of the investment
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