Vernon 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. Vernon Delivery recently acquired approximately $5.5 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 $670,000. 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 $320,000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $109,000. Operating the vans will require additional working capital of $41,000, 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 4 Year 1 $157,000 Year 2 $317,000 Year 3 $406,000 $443,000 The large trucks are expected to cost $750,000 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 $13,000. Vernon Delivery's management has established a 12 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. (Enter answers in whole dollar, not in million. Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) 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 $157,000 Year 2 $317,000 Yanr 3 $406,000 YeR 4 $443,000 The large trucks are expected to cost $750,000 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 $13,000. Vernon Delivery's management has established a 12 percent dested 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. (Enter answers in whole dollar, not in million. Negative amounts should be indicated by a minus sign. Round your intermediate calculations and final answers to 2 decimal places.) Purchase of City Vans Purchase of Trucks a. Net Present Value (NPV) b. Present Value Index (PVI) 5% TABLE 1 PRESENT VALUE OF $1 6% 7% 8% 9% 10% 12% 14% 15% 20% 1 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193 0.8620690833333 20.924556 0.907029 0.889996 0.8734390 .85339 0.841680 0.826446 0797194 0.769468 0743163 0.694444 3 0.888996 0.863838 0.839619 0.816298 0.793832 0.772183 0.751315 0.7117800674972 0.640658 0.578704 4 0.854804 0.8227020792094 0.762895 0.735030 0.708425 0.683013 0.635518 0.592080 0.552291 0.482253 5 0.821927 0.783526 0.747258 0.712986 0.680583 0.649931 0.620921 0.567427 0.519369 0.476113 0.401878 6 0790315 0.746215 0.704961 0.666342 0.630170 0.596267 0.564474 0.506631 0.455587 0.410142 0.334898 7 0.759918 0.710681 0.665057 0.622750 0.583490 0.547034 0.513158 0.452349 0.399637 0.353830 0.279082 8 0.730690 0.6768390.627412 0.582009 0.540269 0.501866 0.466507 0.403883 0.350559 0305025 0.232568 9 0.702587 0644609 0.591898 0.543934 0,500249 0.460428 0.424098 0.360610 0.307508 0.262953 0.193807 10 0.675564 0.613913 0.558395 0.508349 0.463193 0.422411 0.385543 0.321973 0.269744 0.226684 0.161506 11 0.649581 0.584679 0.526788 0.475093 0.428883 0.387533 0,350494 0.2874760.236617 0.195412 0134588 12 0.624597 0.556837 0.4969690.444012 0.397114 0.355535 0.318631 0.256675 0.2075590168163 0112157 130.600574 0.530321 0.4688390.414964 0.367698 0.326179 0.289664 0.229174 0.182069 0.145227 0.093464 14 0.577475 0.505068 0.442301 0.3878170340461 0.299246 0.263331 0.204620 01597100125195 0.077887 15 0.555265 0.481017 0.417265 0.362446 0.315242 0274538 0.239392 0.182696 0.10096 0107927 0.064905 16 0.533908 0,458112 0.393646 0.338735 0.291890 0.251870 0.217629 0163122 0.122892 0.093041 0.054088 17 05133730436297 0371364 0.316574 0.270269 0.231073 0.1978450145644 01078000.080207 0045073 18 0.493628 0.415521 03503440295864 0.250249 02119940179859 0130010 0.094561 006911440037561 190474642 0.395734 0.330513 0.276508 0.231712 0194490 0163508 0116107 00829480059607 0.031301 200456387 0.37689 0.3118050258419 0.214548 0178431 0.448644 00.3667 0072762 00513850026084 TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 n 4% 5% 6% 7% 8% 9% 10% 12% 14% 16% 20% 1 0.961538 0.952381 0.943396 0.934579 0.925926 0.917431 0.909091 0.892857 0.877193 0.862069 0.833333 2 1.886095 18594101833393 1.80B018 1783265 1759111 1735537 1.690051 1646661 1605232 1.527778 3 2.775091 2.723248 2673012 2.624316 2.577097 2.531295 2.486852 2.401831 2321632 2.245890 2106481 4 3629895 3.545951 3.465106 3.387211 3.312127 3.239720 3.169865 3.037349 2.9137122798181 2.588735 5 4451822 4.329477 4.212364 4100197 3.992710 3.889651 3.790787 3.604776 3.433081 3.274294 2.990612 6 5.242137 5.075692 4.917324 4.766540 4.622880 4.485919 4.355261 4.111407 3.888668 3.684736 3.325510 7 6.002055 5.7863735582381 5.389289 5.206370 5.032953 4.868419 4563757 4288305 4.038565 3.604592 8 6.732745 6.463213 6.209794 5.971299574663955348195334926 4.9676404638864 4343591 3.837160 9 7435332 7107822 6.8016926,515232 6.246888 5.995247 5.759024 5.328250 4.946372 4.606544 4.030967 10 8.110896 7721735 7360087 7.023582 6.710081 6.417658 6.144567 5650223 5.216116 4.833227 4.192472 11 8.760477 8.306414 7886875 7498674 7138964 6.805191 6.4950615.937699 5.452733 5.028644 4.327060 12 9385074 8863252 8383844 7942686 7536078 7160725 6.813692 6194374 5.660292 5.197107 4439217 139.985648 9.393573 8.852683 8.3576517903776 7486904 7103356 6.423548 5.842362 5.342334 4532681 14 10.563123 9.898641 9.2949848.745468 8.244237 7786150 7.366687 6.628168 6.002072 5.4675294610567 15 11118387 10.379658 9712249 9.107914 8.559479 80606887606080 6.810864 6.1421685.575456 4.675473 16 11652296 10.837770 10.105895 9.446649 8851369 8312558 2823709 6.973986 6.265060 5.668497 4729561 17 12.165669 11.274066 10477260 9763223 9.121638 8.543631 8.021553 7119630 6372859 5748704 4774634 18 12.659297 11689587 10.827603 100590879.371887 8.755625 8.20112 7249670 6.467420 5.817848 4.812195 1913133939 12.085321 11158116 10.3355959.603599 8.905115 8.364920 73657776.550369 5.877455 4843496 2013.590326 12.462210 11469921 10.59401 9.818147 9128546 8.513564 74694446623131 5928841 4.869580