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AM Express Inc. is considering the purchase of an additional delivery vehicle for $41,000 on january 1,20r1. The truck is expected to have a five-vear
AM Express Inc. is considering the purchase of an additional delivery vehicle for $41,000 on january 1,20r1. The truck is expected to have a five-vear 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 anticlpated to be $71,000 per year for each of the next five years, A driver will cost $50,000 in 20Y1, with an expected annual salary increase of $4,000 for each year thereafter. The annusl operating costs for. the truck are estimated to be $3,000 per year. a. Determine the expected annual net cash fows from the dellvery truck investment for 20Y1-20Y5. b. Calculate the net present value of the investment; assuming that the minimum desired rate of return is 15 \%s. Use the tabie of the present value of $1 presented above. When required, round to the nearest dollar, If required, use the minus sign to indicate a negative net present value. c. Is the additional truck a good investment based on your analysis
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