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Rooney Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages

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Rooney 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. Rooney Delivery recently acquired approximately $6.1 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 o $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 $330,000 per year. The additional vans are expected to hav an average useful life of four years and a combined salvage value of $91,000. Operating the vans will require additional working capital of $39,000, 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 Year 3 Year 4 $161,000 $312,000 $403,000 $438,000 The large trucks are expected to cost $720,000 and to have a four-year useful life and a $85,000 salvage value. In addition to the purchase price of the trucks, up-front training costs are expected to amount to $12,000. Rooney Delivery's management has established a 12 percent desired rate of return. (PV of $1 and PVA of 5) (Use appropriate factor(s) from the tables provided.) Required 1.&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.) Purchase of City Vans Purchase of Trucks . Net Present Value (NPV) b. Present Value Index (PVI) Velma and Keota (V&K) is a partnership that owns a small company. It is considering two alternative investment opportunities. The first investment opportunity will have a four-year useful life will cost $9,319.45, and will generate expected cash inflows of $3,600 per year. The second investment is expected to have a useful life of three years, will cost $12,028.55, and will generate expected cash inflows of $4,500 per year. Assume that V&K has the funds available to accept only one of the opportunities. (PV of S1 and PVA of S1) (Use appropriate factor(s) from the tables provided.) Required a. Calculate the internal rate of return of each investment opportunity. (Do not round intermediate calculations.) b. Based on the internal rates of return, which opportunity should V&K select? a. First investment Second investment b. V&K should select the Intamal Rate of Retur 12% 15% First investment

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