The Morgan Company has been awarded a six-year contract to provide repair service to a commercial bus line. Morgan Company has gathered the following data associated with the items needed for this contract:

The special equipment is in Class 7 with a maximum 15% CCA rate. The income tax rate is 40%, and Morgan's after-tax cost of capital is 14%. At the end of six years, the working capital will be released for use elsewhere.

-The effective cost to Morgan of the need for working capital on the contract is closest to which of the following?

Question

The Morgan Company has been awarded a six-year contract to provide repair service to a commercial bus line. Morgan Company has gathered the following data associated with the items needed for this contract:

The special equipment is in Class 7 with a maximum 15% CCA rate. The income tax rate is 40%, and Morgan's after-tax cost of capital is 14%. At the end of six years, the working capital will be released for use elsewhere.

-The effective cost to Morgan of the need for working capital on the contract is closest to which of the following?

Quizplus · Accepted Answer

The Answer of The Morgan Company has been awarded a six-year contract to provide repair service to a commercial bus line. Morgan Company has gathered the following data associated with the items needed for this contract:

The special equipment is in Class 7 with a maximum 15% CCA rate. The income tax rate is 40%, and Morgan's after-tax cost of capital is 14%. At the end of six years, the working capital will be released for use elsewhere.

-The effective cost to Morgan of the need for working capital on the contract is closest to which of the following?

The Morgan Company Has Been Awarded a Six-Year Contract to Provide