Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $46,000 on January 1, 201. The truck is expected to have a five-year life with an expected residual value of $6,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $67,000 per year for each of the next five years. A driver will cost $47,000 in 20Y1, with an expected annual salary Increase of $4,000 for each year thereafter. The annual operating costs for the truck are estimated to be $2,000 per year.

Present Value of $1 at Compound Interest

Year

6%

10%

12%

15%

20%

0.943

0.893

0.870

0.833

0.890

0.826

0.797

0.756

0.694

3

0.840

0.751

0.712

0.658

0.579

0.792

0.683

0.636

0.572

0.482

5

0.747

0.621

0.567

0.497

0.402

0.705

0.564

0.507

0.432

0.335

0.665

0.513

0.452

0.376

0.279

0.627

0.467

0.404

0.327

0.233

9

0.592

0.424

0.361

0.284

0.194

10

0.558

0.386

0.322

0.247

0.162

a. Determine the expected annual net cash flows from the delivery truck investment for 20Y1-205.

Annual Net Cash Flow

20Y1

20Y2

20Y3

20Y4

20Y5

b. Compute the net present value of the investment, assuming that the minimum desired rate of return is 10%. Use the table of the present value of $1 presented above. When required, round to the nearest dollar. If required, use the minus sign to Indicate a negative net present value.

Present valve of annual net cash flows

Investment