Janes Auto Care is considering the purchase of a new tow truck. The garage doesnt currently have a tow truck, and the $60,020 price tag for a new truck would represent a major expenditure. Jane Austen, owner of the garage, has compiled the estimates shown below in trying to determine whether the tow truck should be purchased. Initial cost $60,020 Estimated useful life 8 years Net annual cash flows from towing $7,960 Overhaul costs (end of year 4) $5,980 Salvage value $12,000 Janes good friend, Rick Ryan, stopped by. He is trying to convince Jane that the tow truck will have other benefits that Jane hasnt even considered. First, he says, cars that need towing need to be fixed. Thus, when Jane 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 Jane the cost of plowing her parking lot. (Rick will give her a used plow blade for free if Jane will plow Rick's driveway.) Third, he notes that the truck will generate goodwill; people who are rescued by Janes 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 Janes Auto Care on its doors, hood, and back tailgatea form of free advertising wherever the tow truck goes. Rick estimates that, at a minimum, these benefits would be worth the following. Additional annual net cash flows from repair work $3,010 Annual savings from plowing 750 Additional annual net cash flows from customer goodwill 960 Additional annual net cash flows resulting from free advertising 740 The companys cost of capital is 9%. Click here to view the factor table. Correct answer. Your answer is correct. 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.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 $Entry field with correct answer -14176.83 Should the tow truck be purchased? The tow truck Entry field with correct answer should not be purchased. SHOW SOLUTION LINK TO TEXT LINK TO VIDEO Partially correct answer. Your answer is partially correct. Try again. Calculate the net present value, incorporating the additional benefits suggested by Rick. (If the net present value is negative, use either 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 $Entry field with incorrect answer now contains modified data 16062.91 Should the tow truck be purchased? The tow truck Entry field with correct answer should be purchased. Incorrect answer. Your answer is incorrect. Try again. Suppose Rick has been overly optimistic in his assessment of the value of the additional benefits. At a minimum, how much would the additional benefits have to be worth in order for the project to be accepted? (Round answer to 0 decimal places, e.g. 125.) Present value of the intangible benefits $Entry field with incorrect answer now contains modified data -13,917.98

displayed in the store provoadat ons be issuecated or het een value is negative, upeither a negative sui preceding the number 45 or parenthesese. 45). Round answer to edesmal ulce. 125. For calculation purposes es decimal places as your answer is ccrrett Csolare the net present value, gnoring the additional benets described by Rick (or the net present value is negative, trse ether a negative sign preceding the number eg. -15 or parentheses 9. (45). Round answer to o decimal places, ag. 125. For calculation purposes, use recimal places as displayed in the factor tube provided) Net presentate -_4176.00 Stall the tum truck te purtal The tow hirk calibur SHOW SOLUTION LINK TO TEXT LENTO VIDEO You answer is partially correct. Ty again. Calculate the present valus, Nct present value Solh2.91 Should the tow truck be purchased? hetowy should be surchased Su Rick Owly optime in Aontott teckdir. Si mi-imum, w much would the call to thirth in the forpropia (Round new to decimal po, g. 125.) Present value of the Intangible benefits 13.017 11 um www PE displayed in the store provoadat ons be issuecated or het een value is negative, upeither a negative sui preceding the number 45 or parenthesese. 45). Round answer to edesmal ulce. 125. For calculation purposes es decimal places as your answer is ccrrett Csolare the net present value, gnoring the additional benets described by Rick (or the net present value is negative, trse ether a negative sign preceding the number eg. -15 or parentheses 9. (45). Round answer to o decimal places, ag. 125. For calculation purposes, use recimal places as displayed in the factor tube provided) Net presentate -_4176.00 Stall the tum truck te purtal The tow hirk calibur SHOW SOLUTION LINK TO TEXT LENTO VIDEO You answer is partially correct. Ty again. Calculate the present valus, Nct present value Solh2.91 Should the tow truck be purchased? hetowy should be surchased Su Rick Owly optime in Aontott teckdir. Si mi-imum, w much would the call to thirth in the forpropia (Round new to decimal po, g. 125.) Present value of the Intangible benefits 13.017 11 um www PE