Question

Net Present Value Method for a Service Company Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $38,000 on January 1, 20Y1. The truck is expected to have a five-year life with an expected residual value of $6,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $60,000 per year for each of the next five years. A driver will cost $43,000 in 20Y1, with an expected annual salary increase of $3,000 for each year thereafter. The annual operating costs for the truck are estimated to be $2,000 per year. Present Value of $1 at Compound Interest Year 6% 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0.797 0.756 0.694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 5 0.747 0.621 0.567 0.497 0.402 6 0.705 0.564 0.507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 8 0.627 0.467 0.404 0.327 0.233 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Determine the expected annual net cash flows from the delivery truck investment for 20Y1-20Y5. Annual Net Cash Flow 20Y1 $ 20Y2 $ 20Y3 $ 20Y4 $ 20Y5 $ b. Compute the net present value of the investment, assuming that the minimum desired rate of return is 12%. Use the table of the present value of $1 presented above. When required, round to the nearest dollar. If required, use the minus sign to indicate a negative net present value. Present value of annual net cash flows $ Investment Net present value $ c. Is the additional truck a good investment based on your analysis? Yes , because the net present value is positive.

Answer #1

**Please provide rating if found correct :)**

Net Present Value Method for a Service Company
Coast-to-Coast Inc. is considering the purchase of an additional
delivery vehicle for $39,000 on January 1, 20Y1. The truck is
expected to have a five-year life with an expected residual value
of $7,000 at the end of five years. The expected additional
revenues from the added delivery capacity are anticipated to be
$67,000 per year for each of the next five years. A driver will
cost $46,000 in 20Y1, with an expected...

Net Present Value Method for a Service Company
Coast-to-Coast Inc. is considering the purchase of an additional
delivery vehicle for $39,000 on January 1, 20Y1. The truck is
expected to have a five-year life with an expected residual value
of $7,000 at the end of five years. The expected additional
revenues from the added delivery capacity are anticipated to be
$67,000 per year for each of the next five years. A driver will
cost $46,000 in 20Y1, with an expected...

Net Present Value Method for a Service Company
Coast-to-Coast Inc. is considering the purchase of an additional
delivery vehicle for $70,000 on January 1, 20Y1. The truck is
expected to have a five-year life with an expected residual value
of $15,000 at the end of five years. The expected additional
revenues from the added delivery capacity are anticipated to be
$65,000 per year for each of the next five years. A driver will
cost $40,000 in 20Y1, with an expected...

Net Present Value Method
On Time Delivery Inc. is considering the purchase of an
additional delivery truck for $32,000 on January 1, 20Y4. The truck
is expected to have a five-year life with an expected residual
value of $5,000 at the end of five years. The expected additional
revenues from the added delivery capacity are anticipated to be
$68,000 per year for each of the next five years. A driver will
cost $50,000 in 20Y4, with an expected annual salary...

AM Express Inc. is considering the purchase of an additional
delivery vehicle for $31,000 on January 1, 20Y1. The truck is
expected to have a five-year life with an expected residual value
of $6,000 at the end of five years. The expected additional
revenues from the added delivery capacity are anticipated to be
$62,000 per year for each of the next five years. A driver will
cost $45,000 in 20Y1, with an expected annual salary increase of
$4,000 for each...

AM Express Inc. is considering the purchase of an additional
delivery vehicle for $44,000 on January 1, 20Y1. The truck is
expected to have a five-year life with an expected residual value
of $7,000 at the end of five years. The expected additional
revenues from the added delivery capacity are anticipated to be
$70,000 per year for each of the next five years. A driver will
cost $48,000 in 20Y1, with an expected annual salary increase of
$4,000 for each...

On Time Delivery Inc. is considering the purchase of an
additional delivery truck for $85,000 on January 1, 20Y4. The truck
is expected to have a five-year life with an expected residual
value of $8,000 at the end of five years. The expected additional
revenues from the added delivery capacity are anticipated to be
$70,000 per year for each of the next five years. A driver will
cost $25,000 in 20Y4, with an expected annual salary increase of
$1,000 for...

Net Present Value Method
Rapid Delivery, Inc., is considering the purchase of an
additional delivery vehicle for $39,000 on January 1, 2016. The
truck is expected to have a five-year life with an expected
residual value of $7,000 at the end of five years. The expected
additional revenues from the added delivery capacity are
anticipated to be $49,000 per year for each of the next five years.
A driver will cost $33,000 in 2016, with an expected annual salary
increase...

Net Present Value Method
Rapid Delivery, Inc., is considering the purchase of an
additional delivery vehicle for $57,000 on January 1, 2016. The
truck is expected to have a five-year life with an expected
residual value of $5,000 at the end of five years. The expected
additional revenues from the added delivery capacity are
anticipated to be $77,000 per year for each of the next five years.
A driver will cost $54,000 in 2016, with an expected annual salary
increase...

Rapid Delivery, Inc., is considering the purchase of an
additional delivery vehicle for $30,000 on January 1, 2016. The
truck is expected to have a five-year life with an expected
residual value of $5,000 at the end of five years. The expected
additional revenues from the added delivery capacity are
anticipated to be $48,000 per year for each of the next five years.
A driver will cost $33,000 in 2016, with an expected annual salary
increase of $3,000 for each...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 13 minutes ago

asked 17 minutes ago

asked 17 minutes ago

asked 20 minutes ago

asked 34 minutes ago

asked 41 minutes ago

asked 41 minutes ago

asked 41 minutes ago

asked 42 minutes ago

asked 49 minutes ago

asked 50 minutes ago

asked 54 minutes ago