Licikin corporation is consldering purchasing a new delivery truch. The truck har mamy advant angot oyer the corngary/s curcent truck (hot the least of which is that it rund. The new truck would cost 556 , apo. Becaute of the increated eapach, reduced maintenance cobth, and increaked fuel econnemy, the mew truck is expected to generate cost stwings of 57 , 700 Af the end of 8 years the cortpary will sell the truck for anestimated $2,000. Traditionally the company has osed a rule of thunb that a progoral thould nor be accepted that the compary should not rely solely on the payback approach, but should also employ the net present value ane thot witen evaluating new projects. The coenoary s cost of capital is 6% Clickchere lo view pyiable Compute the cash payback period and net present value of the propoved investment. (If the net present volue is nejative, use either a niegative sign preceding the number es 45 or parentheses es (45) Round answer for present value to 0 decimal places, e-3. 125. Round answer for Payback period to 1 decimal place, e.5. 10.5, For calculation purposes, use 5 decimal places os displayed in the factor table provided.) Castipsyback period years Net present value (b) Does the project meet the company's cash payback criteria? Does it meet the net present value eriterla far acceptance? Linkin Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $56,300. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $7,700. At the end of 8 years the company will sell the truck for an estimated $28,000. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the asset's estimated useful life. Larry Newton, new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company's cost of capital is 8% Click here to view PV table. (a) Compute the cash payback period and net present value of the proposed imvestment. (II the net present value is negative, use either a negative sign preceding the number eg - 45 or parentheses es (45). Round answer for present value to 0 decimal places, e.s. 125. Round answer for Payback period to 1 decimal ploce, e.s. 10.5. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Cash payback period years Net present value
