D. A proposal to begin operating a eet of trucks. Ten would be bought for only $51,000 each, and the additional business would bring in almost $700,000 in new sales in the rst two years alone. (See Table 4 for details) Table 4 Financial analysis of Project D: Add eet of trucks Initial Year I Year 2 Year 3 Year 4 Year 5 Expenditures Net cost of new trucks $510,000 Additional revenue $382,500 $325,125 $89,250 $76,500 $51,000 Additional operating costs 19,125 19,125 25,500 31,875 38,250 Depreciation 76,500 112,200 107,100 107,100 107,100 Net increase in income 286,875 193,800 (43,350) (62,475) (94,350) Less: Tax at 33% 94,669 63,954 0 0 0 Increase in aftertax income $192,206 $129,846 ($43,350) ($62,475) ($94,350) Add back depreciation $76,500 $112,200 $107,100 $107,100 $107,100 Net change in cash ow ($510,000) $268,706 $242,046 $63,750 $44,625 $12,750 In her mind, Emily quickly went over the evaluation methods she had used in the past: payback, internal rate of return, and net present value. Emily knew that Kay would add a fourth, size of reported earnings, but she hoped she could talk Kay out of using it this time. Emily herself favored the net present value method, but she had always had a tough time getting Kay to understand it. One additional constraint that Emily had to deal with was Kay's insistence that no outside nancing be used this year. Kay was worried that the company was growing too fast and had piled up enough debt for the time being. She was also against a stock issue for fear of diluting earnings and her control over the rm. As a result of Kay's prohibition of outside nancing, the size of the capital budget this year was limited to $800,000, which means that only one of the four projects under consideration could be chosen. Emily was not too happy about that, either, but she had decided to accept it for now, and concentrate on selecting the best of the four