Perez Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Perez Delivery recently acquired approximately $6.9 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds. Todd Payne, the company's operations manager, believes that the money should be used to expand the fleet of city vans at a cost of $640,000. He argues that more vans would enable the company to expand its services into new markets, thereby increasing the revenue base. More specifically, he expects cash inflows to increase by $310,000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $107,000. Operating the vans will require additional working capital of $33,000, which will be recovered at the end of the fourth year. In contrast, Oscar Vance, the company's chief accountant, believes that the funds should be used to purchase large trucks to deliver the packages between the depots in the two cities. The conversion process would produce continuing improvement in operating savings and reduce cash outflows as follows. Year 1 Year 2 $330,000 Year 3 $405,000 Year 4 $447,000 $153,000 The large trucks are expected to cost $720,000 and to have a four-year useful life and a $70,000 salvage value. In addition to the purchase price of the trucks, up-front training costs are expected to amount to $19,000. Perez Delivery's management has established: a 8 percent desired rate of return. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a.&b. Determine the net present value and present value index for each investment alternative. (Round your intermediate calculations and final answers to 2 decimal places. Enter your answer in whole dollars and not in millions.) a. Net Present Value (NPV) b. Present Value Index (PVI) Purchase of City Vans Purchase of Trucks TABLE 1 PRESENT VALUE OF $1 14% 75 105 85 12% 45 145 6% 20% 10901532 0952301 0943396 0954579 0925926 0917431 0.90909 0.092057 077193 0002069 0333333 2 0924556 0907029 0.509996 0.073439 0.357339 0341600 0526446 0.797194 0769460 0743163 3 0105996 0.063030 0339619 0316295 0793032 0772133 0751315 0.711700 0674972 0640655 0.570704 063013 0.635510 0.592000 0552291 4054004 0.022702 0792004 0762095 0.735030 0700425 0402253 040187 50021927 0.763526 0.747255 0712956 0600523 0.649031 0620921 0567427 0519369 0.476113 60790315 0346215 0704901 0666342 0630170 0596267 0564474 0506621 0455507 0410442 033409 7 0759910 071061 0665057 0622750 0.303400 0347034 0513155 0452349 0.399637 0.353430 0209002 0.720690 0.676539 0627412 052009 0540269, 0.301066 0466507 0.403333 0.350339 0305025 0232560 90702567 0644609 0391590 0543934 0.500249 046042 042409 0360610 0.307200 0262953 0193007 0675564 0.013913 0.555395 0505349 0463193 0422411 0305543 0321973 0269744 0.226604 0101506 11 064955 0354079 05267 0475093 0420303 0387533 0.350404 0207476 0236617 0.195417 013455 12 0.624597 0556537 0.496969 0444012 0.397114 0.355535 0315631 0256675 0.207559 0.163465 0.112157 046539 0414964 036769 0320179 0219064 0229174 0132069 0145337 0.093464 0.442301 0307017 0340461 0.299246 0:263331 0204620 0.159710 0.125195 0.0777 0417265 0.362446 0315242 0274533 02393292 0.152006 0140096 0102927 0004905 0393646 0335735 0291300 0251370 0217629 0163122 0122092 009341 0.05405 10 13 0.000574 0530321 14 0577475 0505060 15 0555265 0451017 16 0333900 045112 17 0313373 0436297 0371364 0316574 0.270260 0231073 0.197345 014564 0107000 0000207 0015073 15 049362 0415521 0350344 0295064 0250249 0.211994 0.179559 0130040 0094561 0009144 0.037561 19 0474642 0395734 0330543 0.276505 0231712 0.194400 0.163500 0116107 0.012943 0059607 0011301 20 04563 0.376559 0311305 0255419 021454 0175431 0145544 0.103667 0.072762 0051355 000 TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 " 45 5% 8% 096133 0.952301 2 1306095 ' 2775001 4 3629995 3 4451922 6 7 $ 10 11 13 14 9925645 10.563123 9.095641 15 11.118307 10.379650 16 17 11652296 10337770 12.165669 11:274066 12659297 11.60957 755625 10 13133930 905115 12.005321 20 13.590326 9120546 12462210 205 165 65 75 0362069 0033333 0943396 0934579 0925926 0917431 0909091 0.092157 0.377193 1690051 1605232 1.646001 1527775 1.735537 1.759111 1000013 1753265 1559410 1533393 2.321632 2.401031 2245090 2.106451) 2723245 2.673012 2624316 2577097 2531295 2406052 2913712 2790101 2.500735 3.239720 3.169065 3.037349 3545951 3.465106 3307211 3312127 3274294 2.990612 3.559651 3790707 3.604776 3433001 4.329477 4212364 4.100197 3992710 4355261 3.35966 4111407 4.453919 5242137 5.075692 4766540 4.622000 4917324 4563757 4205305 4060419 6003055 5706573 5582301 5.309209 5.206370 5002953 4.343591 4630064 5.534019 5.334926 4.967640 6.732745 5971209 5746639 6.463213 6209794 5995247 7435332 5.759024 5328250 4946372 4606544 7.107822 6515232 62465 6001692 $216116 4533227 6.417655 6144567 5.650223 110096 7721735 7.023502 6.710001 736000 4327060 5.937699 5452733 5025644 6.495061 700477 2306414 7.336075 7490674 7130964 6.005191 5.197107 0.194374 3.660292 4430217 7.942606 7.536072 7.100725 12 9.305074 063252 $.303044 7.103356 6423545 5.042362 5342334 4332601 0357651 7.903776 7406904 9303573 352603 274546 244237 7.756150 7366607 6.620160 6.002072 5467529 4610567 9294954 9107914 7.606000 610064 6142165 5575456 4675473 $359479 06060 9.712249 8051369 $312550 9440649 6.973906 6265060 5.660497 4729561 10105095 7.119630 6.372059 5740704 4774634 9.763223 9.121630 $543631 021553 10477260 10.059007 10327600 7249670 6:467420 517040 412195 9371507 201412 8364920 7.365777 6350360 5077455 4043496 11.155116 10.335595 9603599 0513564 7409444 11.469921 10.594014 9310147 6.623131 5.925541 4069500 95 10% 12% 145 3604736 3325510 4035565 3604592 3.337100 4030967 4192472 6513692 7.833709 TABLE 1 PRESENT VALUE OF $1 45 6% 145 GALLE 0402253 0401878 033409 75 12% 105 165 20% 10901532 095231 0943396 0954579 0925926 0917431 6.90909 0.092057 077193 0062069 0333333 2 0924556 0907029 0309996 0.073439 0.357339 0341600 0326446 0.797194 0760460 0743163 302996 0063530 0339619 016295 0.793532 0772133 0.751315 0.711750 0674972 0640655 0.575704 4054004 0.022702 0792004 0762095 0.735030 0.700425 0.653013 0635510 0.592000 0552291 5 0.021927 0.763526 0.747255 0712956 0600523 0649031 0620921 0.367427 051936 0476113 0666342 0630170 0.596267 0564474 0506631 0455307 0410442 7 0739910 071061 0660057 0622750 0.503400 0.3420314 0513155 0452349 0.399637 0.353430 0279002- 0627412 0582009 0540269 0301066 0466507 0.403333 0350539 0305025 0232560 90702557 0644609 0591590 0543934 0500249 046042 0424090 0360610 0307300 0262953 0193007 10 0675564 0013913 0555395 0.305349 0.463193 0422411 0305543 0321973 0269744 0.226604 0161506 60790315 0746215 0704901 11 0720090 0.676539 0640551 0554079 05267 0475093 0420303 0.307533 0350404 0207476 0236617 0.195417 03345 12 0.024597 0.556537 0.496969 0444012 0.397114 0355535 0310631 0256675 0.207559 0.16463 0112157 13 0000574 0530121 0.46539 0414964 036769 0326179 0.209604 0229174 0152069 0145227 0.093464 14 0577475 0505060 0.442301 0307017 0340461 0.299246 0:263331 0204620 0.159710 0125195 00777 15 0555265 0451017 0417265 0.362446 0315242 0274535 02393292 0.152006 0140096 0107927 0064905 16 053300 045112 0393646 0335735 0291090 0251370 0217629 0163122 0122092 0093041 005405 17 0513373 0436297 0.371364 0316574 0.270260 0251073 0.197345 0145644 0107000 0000007 0015073 15 0.493425 0415521 0350344 0.295364 0250249 0211994 0.179559 0.130040 0.094561 0009144 0037561 19 0474642 0295734 0330513 0.276500 0231712 0.194490 0,163500 0116107 0.012943 0059607 0011301 20 04563 0.376509 0311005 0.255419 021454 0175431 0145544 0103667 0.072762 0051305 0.0000 TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 45 75 8% 0961330 2 ' 206095 2775091 3 6 7 6002055 10 "1 13 14 990564 10.563123 9090641 15 11.118357 10.370650 16 11662296 1037770 17 12.165669 15 12659297 10 11133930 20 15.590326 165 205 12% 65 9% 0362069 0033333 0.952301 0.043396 0934579 0925926 0917431 0909091 0.092157 0.077193 1605232 1.640661 1327775 1735537 1.690051 1783265 1759111 1.559410 1533393 1.000015 2401531 2.321632 2245090 2.106451 2723245 2.673012 2624316 2577097 2531295 2.406552 2913712 2790131 2.506735 4 3629095 3545951 3.239720 3.169065 3.037349 3.465106 3307211 3312127 3274294 2990612 3.604776 3433001 3.55965 3.790787 4451022 4329477 4212364 4.100197 3992710 4111407 3.359660 3684736 4355261 3325510 4453919 5242137 5075692 4917324 4.766540 4.622000) 4208305 4033565 3604592 4060419 4563757 5706373 5002953 5.582301 5.309209 5.306370 4967640 4630064 4.343591 3.337100 5.534019 5.334926 6.332745 6463213 6209794 5971299 5.746639 4606544 4030967 5995247 7.107522 6515232 62400 6001692 7435332 5759024 5328250 4946372 $216116 4533227 110096 736000 6.417658 6.144567 5.650223 7.721735 7.023582 6.710001 4.327060 6005191 5.937699 5452733 5.025644 6495061 7490674 7130964 700477 2300414 7.356075 6513692 5.197107 4430217 0.194374 5.660292 12 9335074 7942606 7536075 7.100725 3063252 5353544 7.103356 642354 357651 7.903776 7456904 5.042362 5342334 4532601 9393573 352603 9.294954 7366607 6620160 6002072 5467529 4610567 274546 244237 7.756130 7.606000 $359479 060603 9107914 610064 6.142165 5.575456 4675473 9.712249 7.523709 6.973906 9446649 051369 $312550 10.105095 6265060 3.660497 4729361 9763223 9.121630 $543631 021553 7.119630 6.372059 5740704 4774634 11:274066 10477260 6:467420 517540 4312195 11.609557 9371037 201412 10327603 10059007 6550300 3.077455 4043496 12.005321 11.155116 10.335595 9603599 8364920 11.469921 12:462210 10.594014 9310147 513564 95 10% 145 4192472 755625 905115 9120546 7349670 7365772 7.469444 6.623131 5.925541 4009500