Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

please answer urgently! A. 20Y1, $13,000 EX 11-8 Net present value method for a service company Obj. 3 AM Express Inc. is considering the purchase

please answer urgently!
image text in transcribed
A. 20Y1, $13,000 EX 11-8 Net present value method for a service company Obj. 3 AM Express Inc. is considering the purchase of an additional delivery vehicle for $55,000 on January 1, 2011. The truck is expected to have a five-year life with an expected residual value of $15,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $58,000 per year for each of the next five years. A driver will cost $12,000 in 20Y1, with an expected annual salary increase of $1,000 for each year thereafter. The annual operating costs for the truck are estimated to be $3,000 per year. A. Determine the expected annual net cash flows from the delivery truck investment for 20Y1-20Y5. B. Calculate the net present value of the investment, assuming that the minimum desired rate of return is 12%. Use the present value of $1 table appearing in Exhibit 2 of this chapter. log Is the additional truck a good investment based on your analysis? Explain. C

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access with AI-Powered Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Students also viewed these Finance questions