Net Present Value Method for a Service Company

Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $41,000 on January 1, 20Y1. The truck is expected to have a 5-year life with an expected residual value of $6,000 at the end of 5 years. The expected additional revenues from the added delivery capacity are anticipated to be $52,000 per year for each of the next 5 years. A driver will cost $35,000 in 20Y1, with an expected annual salary increase of $3,000 for each year thereafter. The annual operating costs for the truck are estimated to be $2,000 per year.

a. Determine the expected annual net cash flows from the delivery truck investment for 20Y120Y5

Year	Annual Net Cash Flow

20Y1	$
20Y2	$
20Y3	$
20Y4	$
20Y5	$

b. Compute the net present value of the investment, assuming that the minimum desired rate of return is 10%. When required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value.

Net present value

$