Dobbs Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's

Question:

Dobbs is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $56,000. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $7,500. At the end of eight years, the company will sell the truck for an estimated $27,000. Traditionally, the company has used a general rule that it should not accept a proposal unless it has a that is less than 50% of the asset's estimated useful life. Pavel Chepelev, a new manager, has suggested that the company should not rely only on the payback approach, but should also use the method when evaluating new projects. The company's is 8%.
Instructions
(a) Calculate the cash and of the proposed investment.
(b) Does the project meet the company's cash payback criteria? Does it meet the criteria for acceptance? Discuss your results.
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