A company has just purchased a new delivery van. Now it is trying to decide whether to sell its old delivery van or donate it to a​ non-profit organization that delivers meals to the elderly. In...


A company has just purchased a new delivery van. Now it is trying to decide whether to sell its old delivery van or donate it to a​ non-profit organization that delivers meals to the elderly. In estimating the incremental free cash flows for this​ decision, for which of the following should we​ adjust? Do not include factors that are only indirectly used to calculate other factors​ – only choose factors that should be directly​ considered, for their own​ sake, in the cash flow calculations​ (rather than in the calculation of another​ factor). For this particular​ problem, circle the letters of all of the answers that apply​ (i.e., you may choose to circle more than just one​ answer).

​a. The cost of the new van.

​b. The interest expense on the loan to buy the new van.

​c. Any reputation​ effect/goodwill resulting from donating the van to a worthy charity.

​d. The price that the company originally paid for the old van.

​e. The book value of the old van.

​f. The tax effect of donating the old van.

​g. The current market value of the old van.

​h. The tax effect of selling the old van.


Jun 04, 2022
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