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Cindy is contemplating the purchase of a refrigerated van in which she can travel and deliver to customers in remote areas. The original purchase price
Cindy is contemplating the purchase of a refrigerated van in which she can travel and deliver to customers in remote areas. The original purchase price of the van (beginning of year 1) is expected to be $165 000 and its expected useful life is 5 years. She expects the van to generate additional cash sales revenue in year 1 of $75 000, with associated cash expenses of $25 000. The additional sales revenue from and expenses of the van are projected to increase by 10 per cent each year. Ignore company income taxes. Cindy estimates the required rate of return to be 10%. Required a. Calculate the net present value for the investment and state (with a justification of your answer) whether it should be accepted. b. Calculate the payback period for the investment and state (with a justification) whether it should be accepted
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