Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $35,000 on January 1,20Y1. The truck is expected to have a 5 -year
Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $35,000 on January 1,20Y1. The truck is expected to have a 5 -year life with an expected residual value of $5,000 at the end of 5 years. The expected additional revenues from the added delivery capacity are anticipated to be $53,000 per year for each of the next 5 years. A driver will cost $37,000 in 20Y1, with an expected annual salary increase of $3,000 for each year thereafter. The annual operating costs for the truck are estimated to be $2,000 per year. b. Compute the net present value of the investment, assuming that the minimum desired rate of return is 12%. 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. c. Is the additional truck a good investment based on your analysis? because the net present value is
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started