nnas Auto Care is considering the purchase of a new tow truck. The garage doesnt currently have a tow truck, and the $60,040 price tag for a new truck would represent a major expenditure. Anna Austen, owner of the garage, has compiled the estimates shown below in trying to determine whether the tow truck should be purchased.

Initial cost		$60,040
Estimated useful life		8 years
Net annual cash flows from towing		$7,970
Overhaul costs (end of year 4)		$5,970
Salvage value		$12,000

Annas good friend, Rick Ryan, stopped by. He is trying to convince Anna that the tow truck will have other benefits that Anna hasnt even considered. First, he says, cars that need towing need to be fixed. Thus, when Anna tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Anna the cost of plowing her parking lot. (Rick will give her a used plow blade for free if Anna will plow Rick's driveway.) Third, he notes that the truck will generate goodwill; people who are rescued by Annas tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have Annas Auto Care on its doors, hood, and back tailgatea form of free advertising wherever the tow truck goes. Rick estimates that, at a minimum, these benefits would be worth the following.

Additional annual net cash flows from repair work		$3,010
Annual savings from plowing		760
Additional annual net cash flows from customer goodwill		960
Additional annual net cash flows resulting from free advertising		750

The companys cost of capital is 9%.