Ben Baxi, the president of Ben's Moving Services, Inc., is planning to spend $640,000 for new trucks. He expects the trucks to increase the company's cash inflow as follows.

Year 1: $165,000

Year 2: $180,000

Year 3: $196,000

Year 4: $240,000

The company's policy stipulates that all invesments much earn a minimum rate of return of 10%.

Required:

Round financial figures to nearest whole dollar

a. Compute the net present value of the proposed purchase. Should Mr. Baxi purchase the trucks?

b. Kimberly Hall, the controller is wary of the cash flow forecast and points out that Mr. Baxi failed to consider that the depreciation of trucks used in this project will be tax deductible. The depreciation is expeceted to be $150,000 per year for the four-year period. The company's income tax rate is 30% per year. Use this information to revise the company's expected cash flow from this purchase.

c. Compute the net present value of the purchase based on the revised cash flow forecast. Should Mr. Baxi purchase the trucks?