Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Current Attempt in Progress Sandhill's Auto Care is considering the purchase of a new tow truck. The garage doesn't currently have a tow truck, and
Current Attempt in Progress Sandhill's Auto Care is considering the purchase of a new tow truck. The garage doesn't currently have a tow truck, and the $59,960 price tag for a new truck would represent a major expenditure. Sandhill Austen, owner of the garage, has compiled the following estimates in trying to determine whether the tow truck should be purchased. Sandhill's good friend, Rick Ryan, stopped by. He is trying to convince Sandhill that the tow truck will have other benefits that Sandhill hasn't even considered. First, he says, cars that need towing need to be fixed. Thus, when Sandhill tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Sandhill the cost of plowing her parking lot. (Rick will give her a used plow blade for free if Sandhill will plow Rick's driveway.) Third, he notes that the truck will generate goodwill; people who are rescued by Sandhill's tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have "Sandhill's Auto Care" on its doors, hood, and back tailgate-a form of free advertising wherever the tow truck goes. Rick estimates that, at a minimum, these benefits would be worth the following. Calculate the net present value, ignoring the additional benefits described by Rick. (If the net present value Is negative, use elther a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value Current Attempt in Progress Sandhill's Auto Care is considering the purchase of a new tow truck. The garage doesn't currently have a tow truck, and the $59,960 price tag for a new truck would represent a major expenditure. Sandhill Austen, owner of the garage, has compiled the following estimates in trying to determine whether the tow truck should be purchased. Sandhill's good friend, Rick Ryan, stopped by. He is trying to convince Sandhill that the tow truck will have other benefits that Sandhill hasn't even considered. First, he says, cars that need towing need to be fixed. Thus, when Sandhill tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Sandhill the cost of plowing her parking lot. (Rick will give her a used plow blade for free if Sandhill will plow Rick's driveway.) Third, he notes that the truck will generate goodwill; people who are rescued by Sandhill's tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have "Sandhill's Auto Care" on its doors, hood, and back tailgate-a form of free advertising wherever the tow truck goes. Rick estimates that, at a minimum, these benefits would be worth the following. Calculate the net present value, ignoring the additional benefits described by Rick. (If the net present value Is negative, use elther a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value
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