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Capital Expenditure Problem: U-Haul Rental Truck (15 points) Suppose that a local U-Haul franchise was considering the purchase of a pick-up to add to its
Capital Expenditure Problem: U-Haul Rental Truck (15 points) Suppose that a local U-Haul franchise was considering the purchase of a pick-up to add to its flect of trucks. The truck can be purchased today for $40,000. Based on historical usage of pick-up trucks, U-Haul figures it can rent the truck out for a net revenue of $12,000 for each of four years (this is net amount after accounting for both operational and maintenance fees; assume net revenues are collected at end of each year). The truck will generate this amount for the next four years. The going interest rate (discount rate) is 8%. Answer the following questions: 1. Show a time line with the cash flows of this project 2 . What is the net present value (NPV) of this project S. 3. Should this truck be purchased by U.Haul? yes or no Why or why not
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