Pharaoh's Auto Care is considering the purchase of a new tow truck. the garage doesn't currently have a tow truck and the 59,960 price tag for a new truck would represent a major expenditure. Pharaoh Austin owner of the garage has compiled the following estimates in trying to determine whether the tow truck should be purchased.

initial cost $59,960

estimated useful life 8 years

net annual cash flows from Towing 7,980

overhaul costs (end of year 4) $5,960

salvage value $12,000

Pharaoh's good friend Rick Ryan stopped by he is trying to convince Pharaoh that the tow truck will have other benefits that Pharaoh hasn't even considered first he says cars that need Towing need to be fixed thus when Pharaoh tells 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 Pharaoh the cost of plowing her parking lot Rick will give her a used plow blade for free if Pharaoh will plow Rick's driveway third he knows that the truck will generate Goodwill people who are rescued by Pharaoh's tow truck will feel grateful and might be more inclined to use her service station for the tow truck will have Pharaoh's Auto Care on its doors hood and back tailgate a form of free advertising wherever the tow truck goes Rick estimates that at a minimum these benefits would be worth the following

additional

additional annual net cash flows from repair work $2,990

annual savings from plowing 750

additional annual net cash flows from customer "goodwill" 1,010

additional annual net cash flows resulting from free advertising 760

the company's cost of capital is 9%

Calculate the net present value ignoring the additional benefits described by Rick.

Net present Value?

Calculate the net present value incorporating the additional benefits described by Rick.

Net present Value?

Suppose Rick has been overl optimistic in his assessment of the value of the additional benefits. At a minimum, how much would the additional benefits have to be worth in order for the project to be accepted?

Calculate the net present value, ignoring the additional benefits described by Rick. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125 . For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $ Should the tow truck be purchased? The tow truck be purchased. eTextbook and Media Assistance Used eTextbook 1 eTextbook 2 Video Your answer is partially correct. Calculate the net present value, incorporating the additional benefits suggested by Rick. (If the net present value is negative, use either a negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round answer to 0 decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $ Should the tow truck be purchased? The tow truck be purchased