=+EX 26-7 Net present value method obj. 3

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a. NPV ($27,370)

Rapid Delivery, Inc. is considering the purchase of an additional delivery vehicle for

$38,000 on January 1, 2010. The truck is expected to have a five-year life with an expected residual value of $5,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $60,000 per year for each of the next five years. A driver will cost $43,000 in 2010, with an expected annual salary increase of $2,000 for each year thereafter. The insurance for the truck is estimated to cost $4,000 per year.

a. Determine the expected annual net cash flows from the delivery truck investment for 2010–2014.