t ences The Diamond Freight Company has been offered a seven-year contract to haul munitions for the government. Because this contract would represent new business, the company would have to purchase several new heavy-duty trucks at a cost of $350,000 if the contract were accepted. Other data relating to the contract follow: Annual net cash receipts (before taxes) $105,000 from the contract Salvage value of the trucks at termination of the contract $18,000 The trucks will have a useful life of seven years. To raise money to assist in the purchase of the new trucks, the company will sell several old, fully depreciated trucks for a total selling price of $16,000. The company requires a 16% after-tax return on all equipment purchases. The tax rate is 30%. For tax purposes, the company computes depreciation deductions assuming zero salvage value and using straight-line depreciation on the full cost of the trucks ($350,000). The new trucks would be depreciated over the seven year life. ces the seven year ne Hint When computing the initial cash outlay, remember to reduce the purchase price by the after-tax salvage value of the old trucks. You must pay tax, on the $16,000 received from the sale of the old trucks! Required: (a)Compute the net present value of this investment opportunity. (Round to the nearest dollar amount.) Net present value $ (b)Compute the internal rate of return of this investment opportunity. (Round to two decimal places.) Internal rate of return (c) Would you recommend that the contract be accepted? (Click to select)