capital of $40,000, which will be recovered at the end of the four year. In contrast, Oscar Vance, the company's chief accountant, believes that the funds should be used to purchase large trucks to deliver the packages between the depots in the two cities. The conversion process would produce continuing improvement in operating savings and reduce cash outflows as follows: Year 1 $169,000 Year 2 $316,000 Year 3 $395,000 Year 4 $435,000 The large trucks are expected to cost $870,000 and to have a four-year useful life and a $89.000 salvage value. In addition to the purchase price of the trucks, up front training costs are expected to amount to $13,000. Solomon Delivery's management has established a 12 percent desired rate of return. PV of $1 and PVA of S1) (Use appropriate factor(s) from the tables provided.) Required a.&b. Determine the net present value and present value Index for each Investment alternative. (Enter answers in whole dollar, not in million. Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) Answer is complete but not entirely correct. Purchase of Purchase of City Vans Net Present Value 1 070 07 Prasant Value Index. Solomon Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Solomon Delivery recently acquired approximately $5.8 million of cash capital from its owners, and its president George Hay, is trying to identify the most profitable way to invest these funds. Todd Payne, the company's operations manager, believes that the money should be used to expand the fleet of city vans at a cost of $790,000. He argues that more vans would enable the company to expand its services Into new markets, thereby increasing the revenue base. More specifically, he expects cash Inflows to increase by $340,000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $106,000. Operating the vans will require additional working capital of $48.000, which will be recovered at the end of the fourth year. In contrast, Oscar Vance, the company's chief accountant, believes that the funds should be used to purchase large trucks to deliver the packages between the depots in the two cities. The conversion process would produce continuing improvement in operating savings and reduce cash outflows as follows: Year $169,000 Year 2 $316,800 Year 3 $395,000 Year 4. $435,000 The large trucks are expected to cost $870,000 and to have a four-year useful life and a $89,000 salvage value. In addition to the purchase price of the trucks, up front training costs are expected to amount to $13,000. Solomon Delivery's management has established a 12 percent desired rate of retum. (PV of $i and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required b. Determine the net present value and present value Index for each Investment alternative. (Enter answers in whole dollar, not in million. Negative amounts should be indicated by a minus sign. Round your Intermediate calculations and final answers to 2 decimal places.) TABLE 1 PRESENT VALUE OF $1 5% 7% 8% 9% 10% 12% 14% 16% 20% 1 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193 0.862069 0.833333 2 0.924556 0.907029 0.889996 0.873439 0.857339 0.841680 0.826446 0.797194 0.769468 0.743163 0.694444 3 0.888996 0.863838 0.839619 0.816298 0.793832 0.772183 0.751315 0.711780 40.854804 0.822702 0.792094 0.762895 0735030 0.708425 0.683013 0635518 0.592080 0.552291 0.482253 5 0.821927 0.783526 0.747258 0.712986 0.680583 0.649931 0.620921 0.567427 0.519369 0.476113 0.401878 6 0790315 0.746215 0.704961 0.666342 0.630170 0.596267 0.564474 0.506631 0.455587 0.410442 0.334898 7 0.759918 0.710681 0.665057 0.622750 0.583490 0.547034 0.513158 0.452349 0.399637 0.353830 0.279082 80.730690 0.6768390627412 0.582009 0.540269 0.501866 0.466507 0.4038830 .350559 0.305025 0.232568 9 0.702587 0.644609 0.591898 0.543934 0.500249 0.460428 0.424098 0.360610 0.307508 0.262953 0.193807 100.675564 0.613913 0.558395 0.508349 0.463193 0.422411 0.385543 0.321973 0.269744 0.226684 0.161506 11 0649581 0.584679 0.526788 0.475093 0.428883 0.387533 0,350494 0.287476 0236617 0.195417 0.134588 12 0.624597 0.556837 0.496969 0.4440120,397114 0,355535 0.318631 0.256675 0.2075590.168463 0.112157 130.500574 0.530321 0.468839 0.414964 0.367698 0.326179 0.289664 0.229174 0.182069 0.145227 0.093464 14 0.577475 0.505068 0.442301 0.387817 0.340461 0.299246 0.263331 0.20462001597100125195 0.077887 15 0.555265 0.481017 0.417265 0.362446 0.315242 0.274538 0.239392 0.182696 0.140096 0.107927 0.064905 16 0.533908 04581120393646 0.338735 0.291890 0.2518700 217629 0.163122 0.122892 0.093041 0.054088 17 0513373 0.436297 0.371364 0.316574 0.2702690.231073 0.197845 0.145644 0.107800 0.080207 0.045073 18 0.493628 0.415521 0.350344 0.295864 0.250249 0.211994 0179859 0130040 0.094561 0.069144 0.037561 190474642 0.395734 0.33053 0.276508 0.231712 0.194490 0163508 0.116107 0.082948 0.059607 0.031301 200456387 0.376889 0.311805 0.258419 0.214548 0.178431 0.148644 0.103667 0.072762 0,051385 0.026084 4% TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 5% 796 8% 9% 10% 12% 14% 16% 20% 1 0961538 0.952381 0.943396 0.9345790.925926 0.917431 0.909091 0.892857 0.877193 0.862069 0.833333 2 1886095 1859410 1.833393 1808018 1783265 1759111 1735537 1.690051 1.646661 1.605232 1.527778 3 2775091 2.723248 26730122624316 2.577097 2.531295 2.486852 2401831 2.321632 2.245890 2.106481 4 3.629895 3545951 3.465106 3.387211 3.312127 3.239720 3.169865 3.037349 2.913712 2.798181 2.588735 5 44518224329477 4.212364 4.100197 3.992710 3.889651 3.790787 3.604776 3.433081 3.274294 2.990612 6 5242137 5.075692 4917324 4.766540 4.622880 4485919 4.355261 4.111407 3.888668 3.684736 3.325510 7 5.002055 57863735.582381 5.389289 5.206370 5.032953 4.868419 4.563757 4.288305 4.038565 3.604592 8 6.732745 6.463213 5.209794 5.971299 5.746639 5.5348195334926 4.967640 4.638864 4343591 3.837160 9 74353327107822 6.801692 6.5152326246888 5.995247 5.759024 5.328250 4.946372 4.606544 4.030967 10 .110896 7721735 7360087 7.023582 6.710081 6.417658 6.144567 5.650223 5.216116 4.833227 4.192472 11 B760477 306414 7886875 7498674 7138964 6.805191 6.495061 5.937699 5.452733 5.028644 4.327060 12 93850748.8632528383844 7942686 7536078 2160725 6.813692 6.194374 5,660292 5.197107 4.439217 139956489393573 885263 8357651 7903776 7486904 2103356 6.423548 5.842362 5.3423344532681 1405621239898641 9.2949848745468 8.244237 2786150 7366687 6.628168 6.002072 5.467529 4.610567 15 37 10.379658 9712249 9.107914 8.559479806068876060806810864 6.142168 5.575456 4.675473 16 11652296 10 837770 10.105895 9.44664988513698.312558 7823709 6.973986 6.265060 5.668497 4.729561 17 2165669 11.274066 10.477260 9.763223 9121638 8.5436318021553 7119630 6.372859 5.748704 4.774634 18 2659297 11689587 10.827603 10.0590879.371887 8.755625 8.2014127.249670 6.467420 5.817848 4.812195 19 3 9392085321 11158116 10.335595 9.603599 8.905115 8.364920 7365777 6.550369 5.877455 4.843496 20150326 2.462210 11.469921 10.594014 9.818147 9128546 8.513564 7469444 6.623131 5.928841 4.869580