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An investment Jenny is contemplating the purchase of a refrigerated van in which she can travel and deliver to customers in remote areas. She estimates
An investment Jenny is contemplating the purchase of a refrigerated van in which she can travel and deliver to customers in remote areas. She estimates the following information for the potential purchase.
.
Jenny estimates the cost of capital to be 7% and uses straight-line depreciation. The company has sufficient funds to meet all capital expenditure requirements. Required
a. Calculate the net present value for the investment and state (with a justification of your answer) whether it should be accepted.
Machine 145 000 Original outlay for purchase of the van (beginning of Year 1) Expected net cash inflow Year 1 Year 2 Year 3 Year 4 31 000 15 000 20 000 25 000 Estimate residual value 55 000Step by Step Solution
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