Stephen Hillenburg Inc. has seen substantial growth over the past few years and is realizing it may be more financially viable to begin delivering their own goods rather than using a third-party delivery company like they currently do. Currently they are spending an average of $9,000 a month on long-haul shipping.

Their two additional options are to lease a truck or to finance a truck purchase. The lease will require an $8,000 down payment and will cost $686 a month for a ten-year lease. In addition, because they are making their own deliveries, they plan on hiring two delivery drivers. The drivers will each make $18 an hour and each work an average of 125 hours per month. Further, insurance costs will be $550 a month on the truck and gas is expected to cost $1,600 a month. All repairs and maintenance would be handled by the lessor and therefore free to the company.

The financing to purchase option include a 5-year, 2.25% per year loan on a $48,000 truck. The loan would involve constant, equal monthly payments across the entire 5-year stretch. Further, because the truck is a new purchase, the first three years of repairs and maintenance will be free. Then starting in the third year, repairs and maintenance will cost an average of $280 per month. At the end of 10 years they anticipate selling the truck for its book value of $15,000. All labor, insurance, and gas costs incurred under a leasing situation will also be incurred by the company should they choose to purchase a truck with financing.

The monthly shipping costs paid to their third-party delivery company, as well as all gas, labor, insurance, and repair costs are expected to increase by 2% per year. Only leasing or financing costs would be fixed over the ten years. Determine the Net Present Value of each of the three options assuming the company discounts back cash flows by 4% per year. (in excel)