The garden supply company is also considering taking out a loan and buying a small truck to save costs on deliveries. The truck costs $60,000 and is expected to earn end of year after tax net cash inflows of $10000, $15000, $20000 and $20000 for the next four years before it wears out sufficiently to be unreliable and must be sold for an estimated $10000 (after tax).

a. Calculate the NPV of the truck if the interest rate on the loan is 5% pa. (3 marks)

b. Calculate the NPV of the truck if the interest rate on the loan is 10% pa. (3 marks)

c. Calculate the accounting rate of return on the truck investment. (3 marks)

working required