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The Luna Corporation is trying to decide if they should purchase a Truck for hauling material which costs $625,400. The Truck will require $30,600 of

The Luna Corporation is trying to decide if they should purchase a Truck for hauling material which costs $625,400.

The Truck will require $30,600 of working capital and major maintenance in years 3, year 5, and year 7.

The major maintenance will cost $50,000 in years 3 and 5 and $65,000 in years 7.

The truck will increase the net income by $185,750 in years 1 through 4, and $91,250 in years 5 through 7.

At the end of year 7, the company expects to sell the truck for 5% of the cost that they paid for it.

Calculate the net present value of the Truck using a 10% rate of return. Show your work and indicate if the Luna Corporation should purchase the Truck.

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