question and

required a&b

PV of $1 table

PVA of $1 table

Fanning 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. Fanning Delivery recently acquired approximately $70 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 feet of city vans at a cost of $790,000. 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 $250,000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $94,000. Operating the vans will require additional working capital of $41,000, which will be recovered at the end of the fourth year, In contrast, Oscar Vance, the company's chief accountant, belleves 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 Year 3 Year 4 3317,600 $404,600 $435,000 $165,000 The large trucks are expected to cost $870,000 and to have a four-year useful life and a $80,000 salvage value. In addition to the purchase price of the trucks, up front training costs are expected to amount to $10,000 Fanning Delivery's management has established a 12 percent desired rate of return ev or $1 and PVA of $1 (Use appropriate factor(s) from the tables provided.) Required 0.6b. Determine the net present value and present value index for each investment alternative. (Negative amounts should be Indicated by a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) Purchase of City Vans Purchase of Trucks a. Alternative 1 (NPV) 1. Alternative 2 (PVI) TABLE 1 PRESENT VALUE OF $1 7% 4% 5% 6% 8% 9% 1 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 2 0.924556 0.907029 0.889996 0.873439 0.857339 0.841680 30.888996 0.863838 0.839619 0.816298 0.793832 0.772183 4 0.854804 0.822702 0792094 0.762895 0.735030 0.708425 5 0.821927 0.783526 0747258 0.712986 0.680583 0.649931 6 0.790315 0.746215 0.704961 01666342 0.630170 0.596267 7 0.759918 0.710681 0.665057 0.622750 0.583490 0.547034 8 0.730690 0.676839 0.627412 0.582009 0.540269 0.501866 9 0.702587 0.644609 0.591898 0.543934 0.500249 0.460428 10 0.675564 0.613.13 0.558395 0.508349 0.463193 0.422411 11 0.649581 0.584679 0.526788 0.475093 0.428883 0.387533 12 0.624597 0.556837 0.496969 0.444012 0.397114 0.355535 13 0.600574 0.530321 0.468839 0.414964 0.367698 0.326179 14 0.577475 0.505068 0.442301 0.387817 0.340461 0.299246 15 0.555265 0.481017 0.417265 0.362446 0.315242 0.274538 16 0.533908 0.458112 0.393646 0.338735 0.291890 0.251870 17 0.513373 0.436297 0.371364 0.316574 0.270269 0.231073 18 0.493628 0.415521 0350344 0.295864 0250249 0.211994 19 0.474642 0.395734 0.330513 0.276508 0.231712 0.194490 20 0.456387 0.376889 0.311805 0.258419 0.214548 0.178431 10% 12% 14% 16% 20% 0.909091 0.892857 0.877193 0.862069 0.833333 0.826446 0.797194 0.769468 0.743163 0.694444 0.751315 0.711780 0.674972 0.640658 0.578704 0.683013 0.635518 0.592080 0552291 0.482253 0.620921 0.567427 0.519369 0.476113 0.401878 0.564474 0.506631 0.455587 0.410442 0.334898 0.513158 0.452349 0.399637 0.353830 0.279082 0.466507 0.403883 0.350559 0305025 0.232568 0.424098 0.360610 0.307508 0.262953 0.193807 0.385543 0.321973 0.269744 0.226684 0.161506 0.350494 0.287476 0.236617 0.195417 0.134588 0.318631 0.256675 0.207559 0.168463 0.112157 0.289664 0.229174 0.182069 0.145227 0.093464 0.263331 0.204620 0.159710 0.125195 0.077887 0.239392 0.182696 0.140096 0.107927 0.064905 0.217629 0.163122 0.122892 0.093041 0.054088 0.197845 0.145644 0.107800 0.080207 0.045073 0.179859 0.130040 0,094561 0.069144 0.037561 0.163508 0.116107 0,082948 0.059607 0.031301 0.148644 0.103667 0,072762 0,051385 0.026084 TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 4% 10% n 5% 6% 7% 8% 9% 12% 14% 16% 20% 1 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193 0862069 0.833333 2 1.886095 1.859410 1.833393 1.808018 1783265 1759111 1735537 1690051 1.646651 1605232 1527778 3 2.775091 2.723248 2.673012 2.624316 2.577097 2.531295 2486852 2.401831 2.321632 2.245890 2.106481 4 3.629895 3.545951 3.465106 3.387211 3.312127 3.239720 3.169865 3.037349 2.913712 2.798181 2.588735 5 4.451822 4.329477 4.212364 4.100197 3.992710 3.889651 3.790787 3.604776 3.433081 3.274294 2.990612 6 5.242137 5.075692 4917324 4.766540 4.622880 4.485919 4355261 4.111407 3.888668 3684736 3.325510 7 6.002055 5.786373 5.582381 5,389289 5.206370 5.032953 4.868419 4.563757 4288305 4.038565 3.604592 8 6.732745 6.463213 6.209794 5.971299 5.746639 5.534819 5334926 4967640 4.638864 4.343591 3.837160 9 7.435332 7.107822 6.801692 6.515232 6.246888 5.995247 5.759024 5.328250 4.946372 4606544 4.030967 10 8.110896 7721735 2.360087 7023582 6.710081 6.417658 6.144567 5.650223 5 216116 4.833227 4.192472 11 8.760477 8.306414 7.886875 7.498674 7.138964 6.805191 6.495061 5.937699 5.452733 5.028644 4327060 12 9.385074 8.863252 8.383844 7.942686 7.536078 7160725 6.813692 6.194374 5660292 5.197107 4.439217 13 9.985648 9.393573 8.852683 8.357651 7.903776 7.486904 7103356 6.423548 5.842362 5.342334 4532681 14 10.563123 9.898641 9.294984 8745468 8.244237 7786150 7.366687 6.628168 6002072 5.467529 4.610567 15 11.118387 10.379658 9.712249 9.107914 8.5594798060688 7606080 6.810864 6.142168 5.575456 4.675473 16 11.652296 10.837770 10.105895 9.446649 8,851369 8.312558 7823709 6.973986 6.265060 5.668497 4.729561 17 12.165669 11274066 10.477260 9.763223 9.121638 8.543631 8.021553 7119630 6.372859 5.748704 4.774634 18 12.659297 11689587 10.827603 10.059087 9.371887 8.755625 8.201412 2249670 6.467420 5817848 4.812195 19 13.133939 12.085321 11158116 10.335595 9.603599 8.905115 8364920 7.365777 6,550369 4.843496 5.877455 20 13.590326 12.462210 11.469921 10.594014 9.818147 9.128546 8.513564 7.469444 6.623131 5.928841 4.869580