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Five years ago, a company was considering the purchase of 65 new diesel trucks that were 14.92% more fuel-efficient than the ones the firm is

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Five years ago, a company was considering the purchase of 65 new diesel trucks that were 14.92% more fuel-efficient than the ones the firm is now using. The company uses an average of 10 million gallons of diesel fuel per year at a price of $1.25 per gallon. If the company manages to save on fuel costs, it will save $1.875 million per year (1.5 million gallons at $1.25 per gallon). On this basis, fuel efficiency would save more money as the price of diesel fuel rises (at $1.35 per gallon, the firm would save $2.025 million in total if he buys the new trucks). Consider two possible forecasts, each of which has an equal chance of being realized. Under assumption #1, diesel prices will stay relatively low; under assumption #2, diesel prices will rise considerably. The 65 new trucks will cost the firm $5 million. Depreciation will be 25.27% in year 1, 38.4% in year 2, and 36.49% in year 3. The firm is in a 41% income tax bracket and uses a 11% cost of capital for cash flow valuation purposes. Interest on debt is ignored. In addition, consider the following forecasts: Forecast for assumption #1 (low fuel prices): Price of Diesel Fuel per Gallon Prob. (same for each year) Year 1 Year 2 Year 3 0.1 $0.81 $0.91 $1.03 0.2 $1.02 $1.13 $1.1 0.3 $1.13 $1.21 $1.33 0.2 $1.31 $1.46 $1.45 0.2 $1.4 $1.57 $1.62 Forecast for assumption #2 (high fuel prices): Price of Diesel Fuel per Gallon Prob. (same for each year) Year 1 Year 2 Year 3 0.1 $1.2 $1.51 $1.69 0.3 $1.32 $1.7 $2 0.4 $1.82 $2.32 $2.5 0.2 $2.2 $2.53 $2.82 Required: Calculate the percentage change on the basis that an increase would take place from the NPV under assumption #1 to the probability-weighted (expected) NPV. % Do not round intermediate calculations. Input your answer as a percent rounded to 2 decimal places (for example: 28.31%)

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