Question
Sheridan Manufacturers is considering investing in a new truck that will be used to deliver its custom-made furniture. Steven Shop, Controller of Sheridan Manufacturers, is
Sheridan Manufacturers is considering investing in a new truck that will be used to deliver its custom-made furniture. Steven Shop, Controller of Sheridan Manufacturers, is considering a truck which will cost $91200 and which has a useful life of 5 years. The new truck will save $10944 per year in operating costs which are realized at the end of each year. Steven believes if the new truck is purchased it could be sold for $73530 at the end of its useful life. Sheridan's required rate of return is 8%.
Type of cash flow | Periods | Interest rate | Factor |
---|---|---|---|
PV of $1 | 5 | 8% | 0.6806 |
FV of $1 | 5 | 8% | 1.4693 |
PV ordinary annuity | 5 | 8% | 3.9927 |
FV ordinary annuity | 5 | 8% | 5.8666 |
PV annuity due | 5 | 8% | 4.3121 |
What is the new truck's net present value? (round to the nearest dollar)
$2541
$-10904
$21848
$-8890
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