Thornton Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Thornton Delivery recently acquired approximately $6.1 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds. Todd Payne, the company's operations Manager, believes that the money should be used to expand the fleet of city vans at a cost of $760,000. He argues that more vans would enable the company to expand its services into new markets, thereby increasing the revenue base. More specifically, he expects cash inflows to increase by $280,000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $98,000. Operating the vans will require additional working capital of $34.000, which will be recovered at the end of the fourth year. In contrast, Oscar Vance, the company's chief accountant, believes that the funds should be used to purchase large trucks to deliver the packages between the depots in the two cities. The conversion process would produce continuing improvement in operating savings and reduce cash outflows as follows. Year 1 $165,000 Year 2 $322,000 Year 3 $394,000 Year 4 $442,000 The large trucks are expected to cost $840,000 and to have a four-year useful life and a $83,000 salvage value. In addition to the purchase price of the trucks, up front training costs are expected to amount to $10,000. Thornton Delivery's management has established a 16 percent desired rate of return. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.) Required a.&b. Determine the net present value and present value index for each investment alternative. (Round your intermediate calculations and final answers to 2 decimal places. Enter your answer in whole dollars and not in millions.) Purchase of City Vans Purchase of Trucks a Net Present Value (NPV) b. Present Value Index (PVI) TABLE 1 PRESENT VALUE OF $1 49 58 69 75 84 94 1 0.961533 0.952381 0.943396 0.934579 0.923926 0.917431 2 0.924556 0.907029 0.989996 0.873439 0.857339 0541650 3 0.899996 0 563S3S 0.839619 0.316293 0.793832 0.772183 1 0.854504 0.522702 0.792094 0.762595 0.735030 0.708425 5 0.821927 0.783526 0.747258 0.712956 0630533 06-19931 6 0.790315 0.746215 0.704961 0.666342 0.630170 0.596267 7 0.759919 0.710651 0.665057 0.622750 0.583490 0.547034 S 0.730690 0.676539 0.627412 0.592009 0.540269 0.501366 9 0.702557 0.644609 0.591895 0.543934 0.500249 0.460428 10 0.675564 0.613913 0.555395 0.508349 0.463193 0.422411 11 0.649581 0.554679 0.526788 0.475093 0.423333 0337533 12 0624597 0.556837 0.496969 0.4444012 0.397114 0.355535 13 0.600574 0.530321 0.468839 0.414964 0 367698 0.326179 14 0.5774750 50506S 0.442301 0.387817 0.340461 0.299246 15 0.535265 0.481017 0.417265 0 362446 0.315242 0.274533 16 0.533908 0.458112 0.393616 0 338735 0.291590 0.251570 17 0.513373 0.436297 0.371364 0.316574 0.270269 0231073 18 0.493628 0.415521 0.350344 0.295564 0.250249 0.211994 19 0.474642 0.395734 0.330513 0.27650S 0.231712 0.191490 20 0.456357 0.376889 0.311S0S 0.253419 0.214543 0.175431 1045 0909091 0.526.1.16 0.751315 0.683013 0.620921 0.561474 0 $13158 0.466501 0.424095 0.385543 0 350494 0.315631 0.299661 0.263331 0.239392 0.217629 0.197345 0.179859 0.163505 0.145644 12% 144 165 204 0.892852 0.577193 0.562069 0333333 0.797194 0.769463 0.743163 0.694444 0.711780 0.674972 0.610658 0.575704 0.635513 0.592030 0.552291 0.432253 0.567427 0.519369 0.476113 0 401576 0306631 0455587 0.410442 0.334893 0.452349 0399637 0353330 0.279082 0.403883 0.350559 0305025 0232568 0.360610 0.307508 0.262953 0.193807 0.321973 0.269744 0.226634 0.161506 0.267470 0.236617 0.195417 0.134585 0.256675 0.207359 0.163463 0.112157 0.229174 0.152069 0.145227 0.093464 0 201620 0.159710 0.125195 0.077587 0.182696 0 140096 0.107927 0.061905 0.163122 0.122392 0.093041 0.054065 0.145614 0.107300 0.050207 0.045073 0.130040 0.094561 0.069144 0.037561 0.116107 0.052943 0.059607 0.031301 0.103667 0.072762 0.051355 0.026034 TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 12% 0.892857 N 1 2 3 4 5 6 7 S 9 10 45 0.961535 1.856095 2.775091 3.629595 4.451522 5.242137 6 002055 6.732745 7.435332 S. 10596 5.760477 9.385074 9.955645 10.563123 11.118387 11.652296 12.165669 12.659297 13.133939 13.590326 35 0 052381 1.559410 2.723248 3.545951 4329477 5.075692 5.786373 6.463213 7.107822 7.721735 5306414 S.563252 9.393573 9.895611 10.379658 10.837770 11.274066 11.699587 12.095321 12.462210 65 0.943396 1.833393 2.673012 3.465106 4.212364 4917324 5.582381 6 209794 6.801692 7.360037 7.586875 S.383544 3.552683 9.294994 9.712249 10.105895 10.477200 10.527603 11.158116 11.469921 75 0934579 1.SOSOIS 2.624316 3.337211 4.100197 4.766540 5.389259 5.971299 6 515232 7.023582 7.495674 7.942656 8:357651 8.745468 9.107914 9.446649 9.763223 10.059087 10.335595 10.594014 84 95 0.925926 0917431 1.783265 1.759111 2.577097 2 531295 3 312127 3239720 3.092710 3.859651 4622850 4.485919 5.206370 5,032953 5.746639 5.534519 6246SSS 5.995247 6.710031 6.417658 7.133964 6.S05 191 7.5360757160725 7.903776 7.486904 3.244237 7.736150 S.559479 5.060688 S.SS1369 S.312555 9.121638 5.543631 9 371587 8.755625 9.603599 8.905115 9.818147 9.128546 10% 0.909091 1.735537 2.456832 3.169565 3.790737 4335261 4868419 5.334926 5.759024 6.144567 6.495061 6.813692 7.103356 7.366687 7.606030 7.823709 8.021553 8 201412 8.364920 8.513564 149 16 0 877193 0.562069 1.646661 1 605232 2321632 2.245590 2913712 2.793151 3.433051 3.274294 3.535665 3.684736 4.253305 4038565 4.635564 4343591 4946372 4.606544 5.216116 4.833227 5.452733 5.025644 5.660292 5.197107 5.542362 5.342334 6.002072 5.467529 6.142165 5.575456 6.265060 5.663497 6.372859 5.748704 6.467420 5.817845 6.550369 5.877455 6.623131 5.928841 1.690051 2.401$31 3.037349 3.604276 4,111407 4.563757 4.967640 5328250 5.650223 5.937699 6.19413744 6.423548 6,628168 6. SI0861 6.973956 7:119630 7.249670 7/365777 7.469444 209 0.833333 1.527778 2. 106-151 2.585735 2.990612 3.325510 3.604592 3.837160 4030967 4.192472 4.327060 4439217 4.532651 4.610567 4.675473 4.729561 4.774634 4.812195 4843496 4869530 11 12 13 15 16 17 IS 19 20