Question
Sheffield Corporation is considering purchasing a new delivery truck, the truck has many advantages over the company's current truck ( not the list of which
Sheffield Corporation is considering purchasing a new delivery truck, the truck has many advantages over the company's current truck ( not the list of which is that it runs) the new would cost 57,270 dollars. Because of the increased capacity reduced maintenance cost, and increased fuel economy, the new is expected to generate cost savings of 8,300 dollars. At the end of eight years, the company will sell the truck for an estimated 28,200 dollars. Traditionally, the company has used a general rule that it should not accept a proposal unless it has a payback period of less than 50% of the asset's estimated useful life. Chris Johnson, a new manager has suggested that the company should not rely on the payback approach but also use the net present value method when evaluating new projects. The company's cost of capital is 8%. Calculate the cash payback and the net present value of the proposed investment. (if the net present value is negative, use either a negative sign preceding the number e.g -45 on parenthesis e.g (45). Round cash payback to two decimal places e.g. 12.51. For calculation purposes use, use five decimal places as displayed in the factor table provided e.g. 1.25124, and net present value to zero decimal places. e.g 5.275
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