Upscale Home Fashions of Burlington pays fees to a delivery service that amount to an after-tax cost of 2 percent of revenue. Sales have averaged $1.5 million, but have been as low as $1 million and as high as $2 million in the past decade. Upscale could buy its own delivery truck for $30,000, after tax, eliminating the need for the delivery service. The truck would last eight years, with a negligible salvage value. Salary for a driver and other operating costs would result in an after-tax cash outlay of $20,000 a year. The company has a 10 percent cost of capital. Prepare a graphical sensitivity analysis, showing the relationship between net present value for truck investment and sales for the store. Would you recommend acquisition of the truck? Key Data: Delivery fee 2% of sales, required investment $30,000, horizon of 8 years, fixed costs $20,000 per year, cost of capital of 10%.

question: assuming the same expected sales, and that the standard deviation of sales is $300,000. Compute the expected net present value and standard deviation of net present value under the assumption that the cash flows are perfectly correlated. Rework problem on the assumption that cash flows are uncorrelated from year to year.