Question
Billy Brown, owner of Billys Ice Cream On-the Go is investigating the purchase of a new $45,000 delivery truck that would contain specially designed warming
Billy Brown, owner of Billys Ice Cream On-the Go is investigating the purchase of a new $45,000 delivery truck that would contain specially designed warming racks. The new truck would have a six-year useful life. It would save $5,400 per year over the present method of delivering pizzas. In addition, it would result in the sale of 1,800 more litres of ice cream each year. The company realizes a contribution margin of $2 per litre. The truck will have a $13,000 salvage value at the end of six years. Required: Use the net present value approach to find the internal rate of return. To do that, find the discount rate that will cause the net present value to be closest to zero. Please show all your calculations in detail for 3 trial and error attempts. Copy-paste answers will be downvoted.
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