Billy Brown, owner of Billy's Ice Cream On$-$the$-$Go$,$ is investigating purchasing a new delivery van that would contain a

custom$-$built refrigeration unit. The van would cost $$94,000,$ have an eight$-$year useful life, and generate cost savings of

$$17,000$ per year compared to the van currently being used. Also, Billy estimates the new van would result in the sale of

$1,300$ more litres of ice cream each year, which has a contribution margin of $$3$ per litre. $($Ignore income taxes.$)$

Required:

What would be the total annual cash inflows associated with the new van for capital budgeting purposes?

Total annual cash inflows

Calculate the IRR promised by the new van. $($Hint$.$ Use Microsoft Excel to calculate the discount factor$($s$).)($Do not round

intermediate calculations and round your final answer to one decimal place.$)$

Internal rate of return

$\%$

Assume that in addition to the cash flows described above, the van will have a $$13,000$ salvage value at the end of eight

years. Calculate the IRR. $($Hint$.$ Use Microsoft Excel to calculate the discount factor$($s$).)($Do not round intermediate

calculations and round your final answer to one decimal place.$)$