Question
Sheridan Manufacturers is considering investing in a new truck that will be used to deliver its custom-made furniture. Richard 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. Richard Shop, Controller of Sheridan Manufacturers, is considering a truck which will cost $73600 and which has a useful life of 5 years. The new truck will save $8832 per year in operating costs which are realized at the end of each year. Richard believes if the new truck is purchased it could be sold for $59340 at the end of its useful life. Sheridan's required rate of return is 12%.
Type of cash flow Periods Interest rate Factor PV of $1 5 12% 0.5674 FV of $1 5 12% 1.7623 PV ordinary annuity 5 12% 3.6048 FV ordinary annuity 5 12% 6.3528 PV annuity due 5 12% 4.0374
What is the new truck's net present value? (round to the nearest dollar)
$--6260 $15919 $-7087 $-8092
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