Chapter 8

Anonymous
timer Asked: Oct 15th, 2018
account_balance_wallet $9.99

Question Description

Hello, I would like chapter 8 Levels 1-3 levels to be completed in full. Once the question is accepted I can provide the data files.

Chapter 8
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Chapter 8
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Chapter 8
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Chapter 8
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Chapter 8
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Tutor Answer

mickeygabz
School: New York University

See attached

COST PLANNING
Year
Tax deductible Cost
Tax saving
Net Costs After Taxes

Year 0
$ 12,000,000.00
0
$ 12,000,000.00

Year 1
$ 12,720,000.00
$ 1,908,000.00
$ 10,812,000.00

Year 2
$ 13,483,200.00
$ 2,022,480.00
$ 11,460,720.00

COST PLANNING
Year 3
$ 14,292,192.00
$ 2,143,828.80
$ 12,148,363.20

Year 4
$ 15,149,723.52
$ 2,272,458.53
$ 12,877,264.99

Year 5
$ 16,058,706.93
$ 2,408,806.04
$ 13,649,900.89

Year 6
$ 17,022,229.35
$ 2,553,334.40
$ 14,468,894.95

Year 7
$ 18,043,563.11
$ 2,706,534.47
$ 15,337,028.64

Truck
Cost per truck
Total cost of trucks

Asset value
Salvage value
Asset Life

$
$
INPUTS
$
$

Straight Line Depreciation
Yearly depreciation amount
$

20
125,000.00
2,500,000.00

2,500,000.00
200,000.00
7

328,571.43

LOAN ARMOTIZATION
Loan Payment Calculator
Investment Variable
Value
Loan Amount
$
2,250,000.00
Loan Duration in Years
4
Payment periods per year
4
Annual interest rate
4.75%
Periodic Payment
$155,238.00
Annual payment
$620,951.99

Period Number
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16

Remaining Principal
$
2,250,000.00
$
2,121,480.75
$
1,991,435.34
$
1,859,845.63
$
1,726,693.30
$
1,591,959.79
$
1,455,626.31
$
1,317,673.88
$
1,178,083.26
$
1,036,835.00
$
893,909.41
$
749,286.59
$
602,946.37
$
454,868.36
$
305,031.92
$
153,416.18

Interest Payment
Principal Payment
$ 26,718.75
$128,519.25
$ 25,192.58
$130,045.41
$ 23,648.29
$131,589.70
$ 22,085.67
$133,152.33
$ 20,504.48
$134,733.52
$ 18,904.52
$136,333.48
$ 17,285.56
$137,952.44
$ 15,647.38
$139,590.62
$ 13,989.74
$141,248.26
$ 12,312.42
$142,925.58
$ 10,615.17
$144,622.82
$ 8,897.78
$146,340.22
$ 7,159.99
$148,078.01
$ 5,401.56
$149,836.44
$ 3,622.25
$151,615.74
$ 1,821.82
$153,416.18

COST PLANNING
Year
Purchase Cost
Operation cost
Loan interest
Depreciation
Tax deductible Cost
Tax saving
Net Costs After Taxes

Year
1
2
3
4

Annual interest Payment
$
97,645.30
$
72,341.95
$
45,815.11
$
18,005.62

Year 0
$

$

Year 1

Year 2

2,500,000.00
$
$
$
0 $
0 $
2,500,000.00 $

11,400,000.00
97,645.30
328,571.43
11,826,216.72
1,773,932.51
10,052,284.22

$
$
$
$
$
$

11,799,000.00
72,341.95
328,571.43
12,199,913.37
1,829,987.01
10,369,926.37

COST PLANNING
Year 3
$
$
$
$
$
$

12,506,940.00
45,815.11
328,571.43
12,881,326.54
1,932,198.98
10,949,127.56

Year 4
$
$
$
$
$
$

13,257,356.40
18,005.62
328,571.43
13,603,933.45
2,040,590.02
11,563,343.43

Year 5

Year 6

Year 7

$ 14,052,797.78 $ 14,895,965.65 $ 15,789,723.59
$
328,571.43 $
328,571.43
$ 14,381,369.21 $ 15,224,537.08
$ 2,157,205.38 $ 2,283,680.56
$ 12,224,163.83 $ 12,940,856.52

$
328,571.43
$ 16,118,295.02
$ 2,417,744.25
$ 13,700,550.77

Truck
Signing Cost per truck
Total signing cost of trucks

$
$

20
10,000.00
200,000.00

Year
Signing Cost
Operation cost
Lease Cost
Tax deductible Cost
Tax saving
Net Costs After Taxes

Year 0
Year 1
$
200,000.00
$ 11,100,000.00
$
700,000.00
$
200,000.00 $ 11,800,000.00
$
30,000.00 $ 1,770,000.00
$
170,000.00 $ 10,030,000.00

Year 2
$
$
$
$
$

COST PLANNING
Year 3

11,488,500.00
700,000.00
12,188,500.00
1,828,275.00
10,360,225.00

$
$
$
$
$

12,177,810.00
700,000.00
12,877,810.00
1,931,671.50
10,946,138.50

Year 4
$
$
$
$
$

12,908,478.60
700,000.00
13,608,478.60
2,041,271.79
11,567,206.81

Year 5

Year 6

$ 13,682,987.32 $
$
700,000.00 $
$ 14,382,987.32 $
$ 2,157,448.10 $
$ 12,225,539.22 $

Year 7
14,503,966.55
700,000.00
15,203,966.55
2,280,594.98
12,923,371.57

$
$
$
$
$

15,374,204.55
700,000.00
16,074,204.55
2,411,130.68
13,663,073.87

COMPARISON
Net Costs After Taxes
Trucking by Others
Purchasing
Leasing

Year 0
$
$ 2,500,000.00
$
170,000.00

Cost saving comparison
Trucking by Others vs purchasing
Trucking by Others vs leasing

Year 0
Year 1
$ (2,500,000.00) $
759,715.78
$ (170,000.00) $
782,000.00

Rate

Year 1
$ 10,812,000.00
$ 10,052,284.22
$ 10,030,000.00

Trucking by Others vs purchasing
NPV
8%
$3,652,323.12
9%
$3,398,982.88
10%
$3,161,948.14
11%
$2,940,012.11
12%
$2,732,069.31
13%
$2,537,106.10
14%
$2,354,192.21
15%
$2,182,473.10
16%
$2,021,163.07
17%
$1,869,539.13
18%
$1,726,935.34
IRR

Trucking by Others vs purchasing

ROI =

year

Payback period (Years)

40%

PURCHASING OF TRUCKS
258.16%
PAYBACK PERIOD
Beginning bal
saving
1 $ (2,500,000.00)
759715.7846
2 $ (1,740,284.22)
1090793.632
3 $ (649,490.58)
1199235.645

2.54

COMPARISON
Year 2
$
$
$
Year 2
$
$

Rate

Year 3
Year 4
11,460,720.00 $ 12,148,363.20 $ 12,877,264.99
10,369,926.37 $ 10,949,127.56 $ 11,563,343.43
10,360,225.00 $ 10,946,138.50 $ 11,567,206.81

Year 6
$ 14,468,894.95
$ 12,940,856.52
$ 12,923,371.57

Year 3
Year 4
Year 5
Year 6
1,090,793.63 $ 1,199,235.64 $ 1,313,921.56 $ 1,425,737.06 $ 1,528,038.43
1,100,495.00 $ 1,202,224.70 $ 1,310,058.18 $ 1,424,361.67 $ 1,545,523.37
Trucking by Others vs leasing
NPV
8%
$5,865,687.78
9%
$5,590,004.72
10%
$5,331,157.58
11%
$5,087,916.04
12%
$4,859,152.72
13%
$4,643,833.54
14%
$4,441,009.13
15%
$4,249,807.04
16%
$4,069,424.83
17%
$3,899,123.75
18%
$3,738,223.11
IRR

Trucking by Others vs leasing

S

ending bal
$
$
$

Year 5
$ 13,649,900.89
$ 12,224,163.83
$ 12,225,539.22

(1,740,284.22)
(649,490.58)
549,745.06

494%

Year 7
$ 15,337,028.64
$ 13,700,550.77
$ 13,663,073.87
Year 7
$ 1,636,477.88
$ 1,673,954.78

Leasing is the best option. It has the lowest Netcost after tax on
average per year and has thus the highest cost saving and IRR.
Leasing should thus be adopted


Loan Payment Calculator
Investment Variable
Value
Loan Amount
$
300,000.00
Loan Duration in Years
25
Payment periods per year
12
Annual interest rate
4.25%
Periodic Payment
$1,625.21
Period Number
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37

Remaining Principal
$
300,000.00
$
299,437.29
$
298,872.58
$
298,305.87
$
297,737.16
$
297,166.43
$
296,593.68
$
296,018.90
$
295,442.09
$
294,863.23
$
294,282.32
$
293,699.36
$
293,114.33
$
292,527.23
$
291,938.05
$
291,346.78
$
290,753.42
$
290,157.96
$
289,560.38
$
288,960.70
$
288,358.89
$
287,754.94
$
287,148.86
$
286,540.63
$
285,930.25
$
285,317.70
$
284,702.99
$
284,086.10
$
283,467.02
$
282,845.75
$
282,222.28
$
281,596.61
$
280,968.71
$
280,338.60
$
279,706.25
$
279,071.66
$
278,434.83

Interest Payment Principal Payment
$
1,062.50
$562.71
$
1,060.51
$564.71
$
1,058.51
$566.71
$
1,056.50
$568.71
$
1,054.49
$570.73
$
1,052.46
$572.75
$
1,050.44
$574.78
$
1,048.40
$576.81
$
1,046.36
$578.86
$
1,044.31
$580.91
$
1,042.25
$582.96
$
1,040.19
$585.03
$
1,038.11
$587.10
$
1,036.03
$589.18
$
1,033.95
$591.27
$
1,031.85
$593.36
$
1,029.75
$595.46
$
1,027.64
$597.57
$
1,025.53
$599.69
$
1,023.40
$601.81
$
1,021.27
$603.94
$
1,019.13
$606.08
$
1,016.99
$608.23
$
1,014.83
$610.38
$
1,012.67
$612.54
$
1,010.50
$614.71
$
1,008.32
$616.89
$
1,006.14
$619.08
$
1,003.95
$621.27
$
1,001.75
$623.47
$
999.54
$625.68
$
997.32
$627.89
$
995.10
$630.12
$
992.87
$632.35
$
990.63
$634.59
$
988.38
$636.84
$
986.12
$639.09

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Anonymous
Tutor went the extra mile to help me with this essay. Citations were a bit shaky but I appreciated how well he handled APA styles and how ok he was to change them even though I didnt specify. Got a B+ which is believable and acceptable.

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