Betty has recently retired and is now considering starting a new business of selling tacos at local companies. She can purchase a used taco truck that has a useful life of 6 years, but that is great because she only wants to work for another 6 years. The salvage value of the truck will be zero at the end of the 6 years (cant even sell for junk) and the value of her business will also be zero (there are no barriers to entry, thus the value of the business is nil). She estimates that she can project consistent cash flows of $2,500 for the next 6 years (with the same cash flows every year). She requires a 15% rate of return (given the cost of capital and the opportunity costs of giving up her free time). (You must show your work and formula.

1) What is NPV for this investment? (show your work)

2) What is the IRR? (show your work)

3) Should she invest in the taco truck given the NPV and/or IRR? Why or why not?

\begin{tabular}{|l|l|} \hline Initial Cost & $10,000 \\ \hline Life of the Project & 6 years \\ \hline Annual Cash Inflow & $2,500 \\ \hline Salvage Value & 0 \\ \hline Required Rate of Return & 15% \\ \hline \end{tabular}