TOTAL ASSETS $14,500,000.00

TOTAL LIABILITIES $10,500,000.00

TOTAL STOCKHOLDER'S EQUITY $4,000,000.00

TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY$14,500,000.00

Redtrucks is looking to finance damage risk via third-party insurance. The financial information on the balance sheet will remain stable for the next decade.Redtrucks internal rate of return is 12%.

Redtruck also has received a quote from a highly rated third-party insurer who is promising that Redtrucks insurance premiums will be $160,000 per year for the next 10 years.

Using the present value of future cash flow, what will the cost of a third party vendor be? Be mindful this decision has a 10 year time horizon.Explain.