Question
Monterey Company is considering investing in two new vans that are expected to generate combined cash inflows of $30,000 per year. The vans combined purchase
Monterey Company is considering investing in two new vans that are expected to generate combined cash inflows of $30,000 per year. The vans combined purchase price is $93,000. The expected life and salvage value of each are four years and $23,000, respectively. Monterey has an average cost of capital of 7 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required Calculate the net present value of the investment opportunity. (Round your intermediate calculations and final answer to 2 decimal places.) Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted.
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