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Net present value method for a setvice company Coast-to-Coast inc is considenng the purchase of an additional delivery vehicle for $35,000 on lanoary 1,20Y1. The
Net present value method for a setvice company Coast-to-Coast inc is considenng the purchase of an additional delivery vehicle for $35,000 on lanoary 1,20Y1. The truck is expected to have a 5 -year life with an expected residual value of 55,000 at the end of 5 years. The expected addibonal revenues from the added delivery capacity are anticipated in he 559,000 per year far ead of the bext 5 years. A driver will cost 543,000 in 20Y1, with an expected annual salary increase of $3,000 for each year therealted. The annual operating casts for the truck ale eaniouated to be $2,000 per year- a. Defermine the expected annual net cashi flows from the delivery truck investment for 20y1-20y5. a. Detergnine the expected annual net cach flows from the delivery truck investment for 20Y1-20Y5: Annual Net Cash Flow b. Compute the net present value of the investment, assuming that the munimuen desied rate of return is 10%. Use the table of the present value of $1 presentrd above. When required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value: Present value of annual net cash flows Investment: Net present value 5. Is the addeional truck a qood inwestment based on your anslysis? Yes , beciuse the net present volue is positive
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