Time line; payback; NPV) East Side Delivery is considering the purchase of a new van to replace an existing truck. The van would cost $35,000 and would have a life of seven years with no salvage value. The truck could be sold currently for $4,000, but if it is kept, it will have a remaining life of seven years with no salvage value. By purchasing the van, East Side’s man¬ agers would anticipate operating cost savings as follows:

East Side’s cost of capital and capital project evaluation rate is 10 percent.

a. Construct a time line for the purchase of the van.

b. Determine the payback period. (Ignore taxes.)
C. Calculate the net present value of the van, (Ignore taxes.) LO.1 

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Year Amount $6,800 7,100 1234567 7,300 7,000 7,000 7,100 7,200