Answer:
First year depreciation expense is $2,250
Explanation:
Total depreciation expense is given by:
Price - Salvage Value = 40,000 - 4,000 = 36,000
That $36,000 depreciation expense would be spread out for 200,000 miles.
So for the first year in which the truck is used 12,500 miles, the depreciation expense will be
Question answered.
Note:
Answer:
WACC 6.18%
Explanation:
to get the cost of capital we solve using the gordon model:
D1 1.55
P 28
f 0.00
g 0.02
Ke 0.075357143
Then for the cost of debt, we need to calculate the YTM of the bonds:
which is the rate at which the present value of the coupon payment and maturity equals the market price:
For the complexity this is done with excel or a financial calculator there is also an approximation formula
YTM with excel: 0.073516565
now that we good this we need to determinate the weigth of equity and debt:
250,00 shares x 28 dollars each = 7,000,000
1,500 bonds of $1,000 each at 98% = 7,350,000
value of the company: 7,000,000 + 7,350,000 = 14,350,000
Ew: 7,000,000 / 14,350,000 = 0.487804878
Dw: 7,350,000 / 14,350,000 =0.512195122
Now we got all values and we can determinate the WACC:
Ke 0.075357143
Equity weight 0.487804878
Kd 0.074
Debt Weight 0.512195122
t 0.34
WACC 0.0617752 = 6.18%