riley's pet shop

Project Description:

riley's pet shop is considering the purchase of a new delivery van. riley james, owner of the shop, has compiled the following estimates in trying to determine whether the delivery van should be purchased:

cost of the van $25,000
annual net cash flows 4,300
salvage value 3,000
estimated useful life 8 years
cost of capital 10%

riley's assistant manager is trying to convince riley that the van has other benefits that he hasn't considered in the initial estimates. these additional benefits, including the free advertising the store's name painted on the van's doors will provide, are expected to increase net cash flows by $500 each year.

(a) calculate the net present value of the van, based on riley's initial estimates. should the van be purchased?
(b) calculate the net present value, when including the additional benefits suggested by the assistant manager. should the van be purchased?
(c) determine how much the additional benefits would have to be worth (in terms of present value) in order for the van to be purchased.

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Price Type: Negotiable

Total Proposals: 7
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