Zachary Company is considering investing in two new vans that are expected to generate combined cash inflows of $28,500 per year. The vans combined purchase price is $99,500. The expected life and salvage value of each are four years and $21,400, respectively. Zachary has an average cost of capital of 16 percent. (PV of $1 and PVA of $1) (Use appropriate factor(s) from the tables provided.)

Required

1. Calculate the net present value of the investment opportunity. (Negative amount should be indicated by a minus sign. Round your intermediate calculations and final answer to 2 decimal places.)

   1. NET PRESENT VALUE

2. Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted.

   1. WILL THE RETURN BE ABOVE OR BELOW THE COST OF CAPITAL?

   2. SHOULD THE INVESTMENT OPPORTUNITY BE ACCEPTED?

TABLE 1 PRESENT VALUE OF $1 n 4% 5% 6% 7% 8% 9% 10% 12% 14% 16% 20% 1 0.961538 0.952381 0.943396 0.934579 0.92526 0.917431 0.909091 0.892857 0.877193 0.862069 0.833333 2 0.924556 0.907029 0.889996 0.873439 0.857339 0.841680 0.826446 0.797194 0.769468 0.743163 0.694444 3 0.888996 0.863838 0.839619 0.816298 0.793832 0.772183 0.751315 0.711780 0.674972 0.640658 0.578704 4 0.854804 0.822702 0.792094 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 0.790315 0.746215 0.704961 0.666342 0.630170 0.596267 0.564474 0.506631 0.455587 0.410442 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 0.676839 0.627412 0.582009 0.540269 0.501866 0.466507 0.403883 0.350559 0.305025 0.232568 9 0.702587 0.644609 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 0.287476 0.236617 0.195417 0.134588 12 0.624597 0.556837 0.496969 0.444012 0.397114 0.355535 0.318631 0.256675 0.207559 0.168463 0.112157 13 0.600574 0.530321 0.468839 0.414964 0.367698 0.326179 0.289664 0.229174 0.182069 0.145227 0.093464 14 0.577475 0.505068 0.442301 0.387817 0.340461 0.299246 0.263331 0.204620 0.159710 0.125195 0.077887 15 0.555265 0.481017 0.417265 0.362446 0.315242 0.274538 0.239392 0.182696 0.140096 0.107927 0.064905 16 0.533908 0.458112 0.393646 0.338735 0.291890 0.251870 0.217629 0.163122 0.122892 0.093041 0.054088 17 0.513373 0.436297 0.371364 0.316574 0.270269 0.231073 0.197845 0.145644 0.107800 0.080207 0.045073 18 0.493628 0.415521 0.350344 0.295864 0.250249 0.211994 0.179859 0.130040 0.094561 0.069144 0.037561 19 0.474642 0.395734 0.330513 0.276508 0.231712 0.194490 0.163508 0.116107 0.082948 0.059607 0.031301 20 0.456387 0.376889 0.311805 0.258419 0.214548 0.178431 0.148644 0.103667 0.072762 0.051385 0.026084 TABLE 2 PRESENT VALUE OF AN ANNUITY OF $1 n 4% 5% 6% 7% 1 0.961538 0.952381 0.943396 0.934579 2 1.886095 1.859410 1.833393 1.808018 3 2.775091 2.723248 2.673012 2.624316 4 3.629895 3.545951 3.465106 3.387211 5 4.451822 4.329477 4.212364 4.100197 6 5.242137 5.075692 4.917324 4.766540 7 6.002055 5.786373 5.582381 5.389289 8 6.732745 6.463213 6.209794 5.971299 9 7.435332 7.107822 6.801692 6.515232 10 8.110896 7.721735 7.360087 7.023582 11 8.760477 8.306414 7.886875 7.498674 12 9.385074 8.863252 8.383844 7.942686 13 9.985648 9.393573 8.852683 8.357651 14 10.563123 9.898641 9.294984 8.745468 15 11.118387 10.379658 9.712249 9.107914 16 11.652296 10.837770 10.105895 9.446649 17 12.165669 11.274066 10.477260 9.763223 18 12.659297 11.689587 10.827603 10.059087 19 13.133939 12.085321 11.158116 10.335595 20 13.590326 12.462210 11.469921 10.594014 8% 0.925926 1.783265 2.577097 3.312127 3.992710 4.622880 5.206370 5.746639 6.246888 6.710081 7.138964 7.536078 7.903776 8.244237 8.559479 8.851369 9.121638 9.371887 9.603599 9.818147 9% 0.917431 1.759111 2.531295 3.239720 3.889651 4.485919 5.032953 5.534819 5.995247 6.417658 6.805191 7.160725 7.486904 7.786150 8.060688 8.312558 8.543631 8.755625 8.905115 9.128546 10% 0.909091 1.735537 2.486852 3.169865 3.790787 4.355261 4.868419 5.334926 5.759024 6.144567 6.495061 6.813692 7.103356 7.366687 7.606080 7.823709 8.021553 8.201412 8.364920 8.513564 12% 0.892857 1.690051 2.401831 3.037349 3.604776 4.111407 4.563757 4.967640 5.328250 5.650223 5.937699 6.194374 6.423548 6.628168 6.810864 6.973986 7.119630 7.249670 7.365777 7.469444 14% 0.877193 1.646661 2.321632 2.913712 3.433081 3.888668 4.288305 4.638864 4.946372 5.216116 5.452733 5.660292 5.842362 6.002072 6.142168 6.265060 6.372859 6.467420 6.550369 6.623131 16% 0.862069 1.605232 2.245890 2.798181 3.274294 3.684736 4.038565 4.343591 4.606544 4.833227 5.028644 5.197107 5.342334 5.467529 5.575456 5.668497 5.748704 5.817848 5.877455 5.928841 20% 0.833333 1.527778 2.106481 2.588735 2.990612 3.325510 3.604592 3.837160 4.030967 4.192472 4.327060 4.439217 4.532681 4.610567 4.675473 4.729561 4.774634 4.812195 4.843496 4.869580