Blossom Auto Care is considering the purchase of a new tow truck. The garage currently has no tow truck, and the $59,990 price tag for a new truck would be a major expenditure for it. Donna Garcia, owner of the garage, has compiled the following estimates in trying to determine whether she should purchase the tow truck: Initial cost Estimated useful life Net annual cash flows from towing Overhaul costs (end of year 4) Salvage value $59,990 8 years $8,010 $4,960 $15,000 Donna's good friend, Kenneth Lewis, stopped by. He is trying to convince Donna that the tow truck will have other benefits that Donna has not even considered. First, he says, cars that need towing need to be fixed. Thus, when Donna tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Donna the cost of plowing her parking lot. (Kenneth will give her a used plow blade for free if Donna will plow Kenneth's driveway.) Third, he notes that the truck will generate goodwill; that is, people who are rescued by Donna and her tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have "Blossom Auto Care" on its doors, hood, and back tailgate -a form of free advertising wherever the tow truck goes. Kenneth estimates that, at a minimum, these benefits would be worth the following: Additional annual net cash flows from repair work $3,000

Donna's good friend, Kenneth Lewis, stopped by. He is trying to convince Donna that the tow truck will have other benefits that Donna has not even considered. First, he says, cars that need towing need to be fixed. Thus, when Donna tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Donna the cost of plowing her parking lot. (Kenneth will give her a used plow blade for free if Donna will plow Kenneth's driveway.) Third, he notes that the truck will generate goodwill; that is, people who are rescued by Donna and her tow truck will feel grateful and might be more inclined to use her servicestation in the future or buy gas there. Fourth, the tow truck will have "Blossom Auto Care" on its doors, hood, and back tailgate -a form of free advertising wherever the tow truck goes. Kenneth estimates that, at a minimum, these benefits would be worth the following: Click here to view the factor table: (a) Calculate the net present valuc, ignoring the additional benefits described by Kenneth. (If the net present value is negative, use either a nezative sign preceding the number es. -45 or parentheses es. (45). For colculation purposes, use 5 decimal places as displayed in the foctor table provided, es. 1.25124 and final answer to 0 decimal ploces, es. 5,275.) Net present value Should Donna purchase the tow truck? eTextbook and Media Blossom Auto Care is considering the purchase of a new tow truck. The garage currently has no tow truck, and the $59.990 price tag for a new truck would be a major expenditure for it. Donna Garcia, owner of the garage, has compiled the following estimates in trying to determine whether she should purchase the tow truck: Donna's good friend, Kenneth Lewis, stopped by. He is trying fo convince Donna that the tow truck will have other benefits that Donna has not even considered. First, he says, cars that need towing need to be fixed. Thus, when Donna tows them to her facility. her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Donna the cost of plowing her parking lot. (Kenneth will give her a used plow blade for free if Donna will plow Kenneth's driveway) Third, he notes that the truck will generate goodwill; that is, people who are rescued by Donna and her tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have "Blossom Auto Care" on its doors, hood, and back tailgate -a form of free advertising wherever the tow truck goes. Kenneth estimates that, at a minimum, these benefits would be worth the following