Palo Alto Corporation is considering purchasing a new delivery truck. The truck has many advantages over the companys current truck (not the least of which is that it runs). The new truck would cost $55,820. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,180. At the end of 8 years the company will sell the truck for an estimated $28,360. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the assets estimated useful life. Larry Newton, a new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The companys cost of capital is 8%. (Refer the below table).

6497 isn't the answer :(

TABLE 3 Present Value of 1 Periods 10% 90909 5% 8% 12% 4% 96154 .95238 .92456 .90703 .89000 0.87344 8573484168 82645 81162 .79719 .75614 .88900 86384 83962 0.81630 .79383 .77218.75132 .73119 .71178 65752 85480 82270 .79209 0.76290 .73503 .70843 68301 .65873 63552 .57175 .82193 .78353 .74726 0.71299 68058 64993 62092 .59345 .56743 49718 .7903 74622 .70496 0.66634 63017 .59627 56447.53464.50663 43233 75992 .71068 66506 0.62275 .58349 .54703 51316.48166 45235 37594 .73069 67684 .6274 0.58201 54027 .50187 4665 .43393 40388 .32690 70259 64461 .59190 0.54393 .50025 46043 42410 .39092 36061 .28426 .67556 61391 55839 0.50835 46319 42241.38554 35218 .32197 .24719 .64958 58468.52679 0.47509 42888 38753.35049 31728 28748 .21494 .62460 .55684 49697 0.44401 .3971 35554 .31863 28584 25668 18691 60057 .53032 46884 0.41496 .36770 32618 .289662575 .22917 .16253 57748 . .55526 48102 41727 0.36245 .31524 .27454.23939 20900 18270 .12289 5339 45811 .39365 0.33873 29189 .25187 .21763 18829 16312 .10687 .51337 43630 .37136 0.31657 27027 .23107.19785 16963.14564 .09293 49363 41552 .35034 0.29586 .25025 21199 17986.15282 13004 .08081 47464 .39573 3305 0.27615 2317 19449 16351 45639 37689 31180 0.25842 21455 .17843 7% 9% 11% 15% 86957 6% 94340 0.93458 92593 91743 90090 89286 4 6 7 9 12 13 50507 44230 0.38782 34046 29925 26333 23199 20462 14133 15 18 13768 11611 .07027 12403 10367 06110 20 14864