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P13 Hermes Pty Ltd operates a courier service. A new van is required to meet the increased demand for the company's services. The choice has
P13 Hermes Pty Ltd operates a courier service. A new van is required to meet the increased demand for the company's services. The choice has been narrowed down to three vans, A, B and C, each costing $100 000. Net cash flow estimates are as follows: Net cash flow estimates ($) Year Van A Van B Van C 1 $47000 $48000 $47000 2 $50 000 $40 000 $48000 3 $50 000 $40 000 $48000 4 $58 000 $52000 $55 000 5 0 $42000 0 Required rate of return 20% 20% 20% NPV $30 795 $32 881 $26801 By discounting each net cash flow, show that the net present value of Van A has been calculated properly. Which van should be purchased? Give reasons
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