Problem 12-4A (Video) Jane's Auto Care is considering the purchase of a new tow truck. The garage doesn't currently have a tow truck, and the $59,970 price tag for a new truck would representa major expenditure. Jane Austen, owner of the garage, has compiled the estimates shown below in trying to determine whether the tow truck should be purchased. Initial cost $59,970 Estimated useful le 8 years Net annual cash flows from towing $8,020 Overhaul costs (end of year 4) $6.000 Salvage value $12,000 Jane's good friend, Rick Ryan, stopped by. He is trying to convince Jane that the tow truck will have other benefits that ane hasn't even considered. First, he says, cars that need towing need to be fred. Thus, when Jane tows 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 lane the cost of plowing her parking lot. (Rick will give her a used plow blade for free if Jane will plow Rick's driveway) Third, he notes that the truck will generate goodwill people who are rescued by Jane's tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have "Jane's Auto Care on its doors, hood, and back tailgate-a form of free advertising wherever the tow truck goes. Rick estimates that, ata minimum, these benefits would be worth the following. Additional arvual net cash flows from repair work $3,010 Annual savings from plowing 740 Additional annual net cash flows from customer goodwill 1,010 Additional annual net cash flows resulting from free advertising 740 The company's cost of capital is 9% Click here to view.py table. net Tryin Your answer is partially correct. Try again. 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 ..-45 or parentheses (45) Round answer to decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present valve Should the tow truck be purchased? The tow truck should not be purchased Your answer is partially correct. Try again. Calculate the nat present value incorporating the additional benefits syagested by Rick (Ir the net present value is negative, use either a negative sign preceding the numbers.g.-45 or parentheses ... (45). Round answer to o 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? Calculate the net present value, Incorporating the additional benefits suggested by Rick (If the net present value is negative, seether a negative sign preceding the number .g.-45 or parentheses .. (45). Round answer to o 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 should . be purchased Your answer is incorrect. Try again Suppose Rick has been overly 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 (Round answer to o decimal places, e.g. 125.) Present value of the intangible benefits Click if you would like to show Work for this questioni Open Show Work
