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Mike's Basketball Company is looking into the purchase of a new $95,000 delivery truck that would be specially designed to transport large outdoor hoops. The
Mike's Basketball Company is looking into the purchase of a new $95,000 delivery truck that would be specially designed to transport large outdoor hoops. The new truck would have a useful life of six years. It would save $9,200 per year over the present method of delivering their product. In addition, it would result in the sale of 15 more hoops each year with a contribution margin of $325 per hoop. a) What would be the total annual cash inflows associated with the new truck for capital budgeting purposes? b) Mike requires a 10% return. Find the NPV of the inflows and outflows associated with the truck. c) Find the internal rate of return promised by the new truck. e) In addition to the above data, assume that due to the unique design, the truck will have a salvage value of $65,000 at the end of six years. Using this new information, compute the NPV. f) In addition to the above data, assume that due to the unique design, the truck will have a salvage value of $65,000 at the end of six years. Using this new information, compute the IRR
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