You have been asked by the President of your company to evaluatethe proposed acq

You have been asked by the President of your company to evaluatethe proposed acquisition of a new special- purpose truck. Thetrucks basic price is $50000 and it will cost another $10000 tomodify it for special use by your firm. The truck falls in theMACRS 5-year class (20321912116) and it will be sold afterTWO years for $20000. Use of the truck will require an increase innet operating working capital (spare parts inventory) of $2000.The truck will have no effect on revenues but it is expected tosave the firm $20000 per year in before-tax operating costsmainly labor. The firms marginal tax rate is 40 percent.The Firmscapital structure is 50% debt and 50% equity. They calculate theirWACC to be 9.0% using the following imputs: before tax cost of debt10% cost of equity 12% expected rate of return 12% risk freerate 4% and beta 1.0.