Ch. 10: Homework Help Save & Exit Submit Check my work 7 Solomon Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of smal vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between and its president, George Hay, is trying to identify the most profitable way to invest these funds. 3.75 points 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 $670,000. He revenue base. More specifically. he expects cash inflows to increase by $260,000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $104.000. Operating the vans will require additional working capital of $38,000, which will be recovered at the end of the fourth year argues that more vans would enable the company to expand its services into new markets, thereby increasing the eBook References 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 1Year 2 Year 3 Year4 $155,000 $313,000 $409,00 $445,800 The large trucks are expected to cost $750.000 and to have a four-year useful life and a s76,000 salvage value. In addition to the purchase price of the trucks, up-front training costs are expected to amount to $11,000. solomon Delivery's management has established a 10 percent desired rate of return. (PV of $1 and PVA of 51) (Use appropriate factor(s) from the tables provided.) Required Prev 7 of 8 Next > :30 PM 12/10/2018 7 savings and reduce cash outflows as follows: ear ear 4 $155,000 $313,000 $49,000 $445,000 3.75 points The large trucks are expected to cost $750,000 and to have a four-year useful life and a $76,000 salvage value. In addition to the Skippedpurchase price of the trucks, up-front training costs are expected to amount to $11,000. Solomon Delivery's management has established a 10 percent desired rate of return (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) eBook Required References a.&b. Determine the net present value and present value index for each investment alternative. (Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) Purchase of City Purchase o Trucks ans a. Alternative 1 (NPV) b. Alternative 2 (PVI) Mc TABLE 1 PRESENT VALUE OF $1 7% 12% 10.961538 0.952381 0.943396 0934579 0925926 0917431 0909091 0892857 0.877193 0.862069 0.833333 2 0.924556 0.907029 0.889996 0873439 0857339 0841680 0826446 0797194 0769468 07 3 0.888996 0.863838 0.839619 0.816298 0793832 0.772183 0751315 0711780 0674972 0640658 0.578704 43163 0.694444 854804 0.822702 0792094 0762895 0735030 0708425 0683013 0635518 0.592080 0.552291 0.482253 708425 0683013 0635518 0.592080 0.552291 5 0.821927 0783526 0747258 0.712986 0680583 0649931 0 0.620921 0.567427 0.519369 0.476113 0.401878 6 0.790315 0746215 0.704961 0666342 0630170 0.596267 0564474 0.506631 0.455587 0.410442 0.334898 7 0.759918 0.710681 0.665057 0622750 0.583490 0.547034 0513158 0.452349 0.399637 8 0730690 0676839 0627412 0.582009 0.540269 0.501866 0466507 9 0702587 0644609 0.591898 0.543934 0. 10 0.675564 0613913 0.558395 0.508349 0463193 0422411 0.385543 0.321973 0.2697 11 0.649581 0.584679 0.526788 0475093 0.428883 0.387533 o 12 0.624597 0556837 0.496969 0444012 0.397114 0355535 0 0.403883 0.350559 0.305025 0.232568 500249 0.460428 0424098 0.360610 0.307508 0.262953 0193807 0.350494 0.287476 0236617 0195417 0134588 0.318631 0.256675 0.207559 0.168463 0.112157 0.367698 0.326179 0.289664 0.229174 0182069 0145227 0.093464 0.387817 0.340461 0.299246 0263331 0.204620 0159710 0125195 0077887 0.315242 0274538 0239392 0182696 0140096 0107927 0.064905 112 0.393646 0.338735 0291890 0251870 0217629 0163122 0122892 0093041 0.054088 0.270269 0.231073 0197845 0145644 0107800 0.080207 0045073 14 0.577475 0.505068 0.442301 0.555265 0.481017 0417265 0.362446 0.513373 0.436297 0.371364 0316574 18 0.493628 0.415521 0350344 0295864 0.415521 0.350344 0295864 0.250249 0.211994 0179859 0130040 0094561 19 04 74642 0.395734 0.330513 0276508 0231712 0194490 0163508 456387 0376889 0.311805 0.258419 0214548 0178431 0148644 0103667 0072762 0051385 o 0116107 0082948 0.059607 0.03130 TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 796 8% 9% 12% 14% 20% 1 0.961538 0.952381 0.943396 0934579 0.925926 0.917431 0909091 0892857 0.877193 0.862069 0.833333 2 1.886095 1859410 1.833393 1808018 1783265 1759111 1735537 1.690051 1646661 1605232 1.527778 3 2.775091 2.723248 2.673012 3 2.775091 2.723248 2673012 2.624316 2577097 2.531295 2486852 2 401831 2.321632 2.245890 2.106481 4 3.629895 3.545951 3.465106 3.3872 3.312127 3.239720 3.169865 3.037349 2.913712 2.798181 2.588735 5 4.451822 4.329477 4.212364 4100197 3.992710 3.889651 3.790787 3.604776 3.433081 3.274294 2.990612 6 5.242137 5.075692 4.917324 4766540 4622880 4.485919 4.355261 4.111407 3.888668 3.684736 3.325510 7 6.002055 5.786373 5.582381 5.389289 5.206370 5.032953 4.868419 4.563757 4.288305 4.038565 3.604592 8 6.732745 6.463213 6.209794 5.971299 5.746639 5.534819 5.334926 4.967640 4638864 4.343591 3.837160 9 7435332 7107822 6801692 6.515232 6.246888 5.995247 5.759024 5.328250 4.946372 4.606544 4.030967 10 8.110896 7721735 7360087 7023582 6.710081 6417658 6.144567 5.650223 5.216116 4.833227 4.192472 11 8.760477 8.306414 7.886875 7.498674 7138964 6.805191 6.495061 5.937699 5.452733 5.028644 4.327060 12 9.385074 8.863252 8.383844 7942686 7536078 7160725 6.813692 6.194374 5.660292 5.197107 4.439217 13 9985648 9393573 8852683 8357651 7903776 7486904 zt03356 6423548 5812352 534204 525st 14 10.563123 9898641 9.294984 8.745468 8.244237 7786150 7366687 6.628168 6.002072 5.467529 4.610567 15 11.118387 10.379658 9712249 907914 8559479 8060688 7606080 6.810864 6142168 5.575456 4.675473 16 11.652296 10.837770 10105895 9446649 8.851369 8.312558 7823709 6.973986 6.265060 5.668497 4.729561 17 12.165669 11.274066 10.477260 9763223 9121638 8.543631 8.021553 7119630 6.372859 5748704 4774634 18 12.659297 11.689587 10 827603 1005908719.371887, 8755625 8.201412 7.249670 45700 SSN8 482135 2 2 2 13.133939 12.085321 11158116 10.335595 9.60359 8.905115 8.364920 7.365777 6.550369 5.877455 4.843496 20 13.590326 12.462210 11469921 10.594014 9818147 9128546 8.513564 7469444 6.623131 5.928841 4.869580