a. & b. determine the net present value and present value index for each investment alternative.

2 0125 Dowarded Rundle Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Rundle Delivery recently acquired approximately $6.5 million of cash capital from its owners, and its president George Hay, is trying to identify the most profitable way to invest these funds. Todd Payne, the company's operations manager believes that the money should be used to expand the fleet of city vans at a cost of $70,000. He argues that more vans would enable the company to expand its services into new markets, thereby increasing the revenue base. More specifically, he expects cash intiows to increase by $330.000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $92,000. Operating the vans will require additional working capital of $31,000, which will be recovered at the end of the fourth year In contrast, Oscar Vance, the company's chief accountant, believes that the funds should be used to purchase large trucks to deliver the packages between the depots in the two cities. The conversion process would produce continuing improvement in operating savings and reduce cash outflows as follows Score ort $161.000 Year $330,000 Year 3700,000 Year 5448,000 The large trucks are expected to cost $790,000 and to have a four year useful life and a $83,000 salvage value. In addition to the purchase price of the trucks, up front training costs are expected to amount to $11,000 Rondle Delivery's management has established a 10 percent desired rate of return (Pol$1 and PVA (S1) (Use appropriate factor(s) from the tables provided) Required a.&b. Determine the net present value and present vakre index for each investment alternative. (Round your intermediate calculations and final answers to 2 decimal places. Enter your answer in whole dollars and not in millions.) Purchase of Purchase of City Vans Trucks Net Prevent Value (NPV) 3280000 $ 220,000 77 Present index 127 PVI 41