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Net Present Value Method for a Service Company Coast-to-Coast Inc. is considering the purchase of an additional dellvery vehicle for $70,000 on January 1, 20Y1.
Net Present Value Method for a Service Company Coast-to-Coast Inc. is considering the purchase of an additional dellvery vehicle for $70,000 on January 1, 20Y1. The truck is expected to have a five-year life with an expected residual value of $15,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $65,000 per year for each of the next five years. A driver will cost $40,000 in 20Y1, with an expected annual salary increase of $2,000 for each year thereafter. The annual operating costs for the truck are estimated to be $6,000 per year. a. Determine the expected annual net cash flows from the delivery truck investment for 20Y1-20Y5. b. Compute the net present value of the investment, assuming that the minimum desired rate of return is 12%. Use the table of the present value of $1 presented above. If required, round to the nearest dollar. If required, use the minus sign to Indicate a negative net present value. C. Is the additional truck a good investment based on your analysis? , because the net present value is
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