Ivanhoe's Auto Care is comidering the purchae of a new tow truck. The garage doesn't currently have a tow truck, and the S60,030 price tag for a hew truck would represent a major expenditure. Ivanhoe Austen, owner of the garage, has compilied the following estimates in trying to determine whether the tow truck should be purchased. Ivanhoe's good friend, Rick Ryan, stopped by. He is trying to corvince Ivanhoe that the tow truck will have ather benefits that lvarhioe hasn't even considered. First, he says, cars that need towing need to be foed. Thus, when lvantioe tows them to her facility, her repair revenses will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving fvanhoe the cost of plowing her parking lot. (Rick will give her a used plow blade for free if tvanhoe will plow Rick's drivewayd Third. he notes that the truck will generate goodwill people who are rescued by Ivanhoe'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 hawe "Ivanhoe'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: Ivanheek good friend. Rick Ryan, stopped by He is trying to corivince lyanhoe that the tow truck will haye other benefits that frintioe hasnit even considered. First, he sivh, cars that need towing need to be fixed. Thus, when lvanhoe tows them to her fachlity. her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it thas saving tvarhoe the cost of plowine her parking lot, \{Rick will give her a usied plow blade for free if Wanthoe will plow Pick's driveway] Third. he notes that the truck will Eenerate goodwilt people who are rescued by lvarthoe's tow truck will feel grateful and might be more inclined to use her service station in the futare or buy eas there. Fourth, the tow truck will have "ivanhoe's Auto Care" on its doors, hood, and buck tallegate-a fom of tree advertiving wherever the tow truck goes. Fick estimates that, at a minimum, these berefits would be worth the folliweing The compary's cost of capital is 9%. Ciick tore to view the factor table (3) Calculate the net present value, ignoring the additional benefits described by Rick, (if the net present value is negative, use either a negative sign preceding the number e.8, 45 or parentheses e.8. (45). Round answer to 0 decimal placen, e. 125 . For calculation purposes, use 5 decimal places as displayed in the foctor toble provided.) Calculate the net present value, ignoring the additional benefits described by Rick. (If the net present volue is negative, use either a negative sign preceding the number e.g. - 45 or parentheses e.s. (45). Round answer to 0 decimal plocer, es. 125 . For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value Should the tow truck be purchased? The tow truck be purchased. eTextbook and Media Attempts: 0 of 3 used (b) The parts of this question must be completed in order. This part will the awailable when you complete the part above
