Arkansas Best Freightways is considering a purchase of three different potential trucks. It is considering three different investment scenarios and their respective cash flows. Arkansas Best Freightways uses a cost of capital of $9$ percent to evaluate the investments.

Year Truck Investment $1$ Truck Investment $2$ Truck Investment $3$ Cost of Capital

Year $0($today$)$ Buy new truck $(85,000)(105,000)(125,000)9\%$

Year $1$ Increased profits $25,00020,00040,000$

Year $2$ Increased profits $25,00030,00030,000$

Year $3$ Increased profits $25,00040,00020,000$

Year $4$ Increased profits $25,00050,00010,000$

Required:

Calculate the net cash flows $($not discounted$)$ over the life of the three investments $($years $0$ to $4).$

Calculate the present value for each of the three possible investments over years $1$ through $4,$ using the $9$ percent cost of capital as the interest $($or discount$)$ rate.

Given the present value of each investment over $4$ years, and the initial cost to invest in each truck, which truck provides the greatest net present value overall?

Which truck provides the lowest NPV$?$