Finning Corporation is considering purchasing a new trailer for its operations for $60,000. The Manager has put together an estimate of anticipated financials:

Initial cost $60,000 Estimated useful life 8 years Annual Depreciation $4,500

Net annual cash inflows $10,990 Net annual cash outflows $ 3,000

Overhaul costs (end of year 4) $5,990 Salvage value $12,000

Prior to moving forward with the purchase, the owner of the company looked at the analysis and realized that there were some intangible benefits that the Manager had not considered. Below are some additional items that the owner has factored into the analysis:

Additional annual net cash flows from repair work $3,010 Annual cost savings 750 Additional annual net cash flows from customer goodwill 970 Additional annual net cash flows resulting from quality 740 The companys cost of capital is 9%.

Required: a) Calculate the NPV based on the Managers initial projections and comment on whether the company should move forward with the purchase b) Calculate the NPV factoring in the additional intangible benefits and comment on whether the company should move forward with the purchase c) Calculate the profitability index for both options and discuss the difference between the profitability index and NPV.