Chapter 10 LO 10-2 Problem 10-17B Applying the net present value approach with and without tax considerations Craig Pike, the president of Craig's Moving Services Inc., is planning to spend $800,000 for new trucks. He expects the trucks to increase the company's cash inflow as follows. Year 1 Year 2 Year 3 Year 4 $206,250 $225.000 $245,000 $300,000 The company's policy stipulates that all investments must earn a minimum rate of return of 10 percent. Required Round financial figures to nearest whole dollar. a. Compute the net present value of the proposed purchase. Should Mr. Pike purchase the trucks? b. Tammy Buckley, the controller, is wary of the cash flow forecast and points out that Mr. Pike failed to consider that the depreciation on trucks used in this project will be tax deductible. The deprecia- tion is expected to be $187,500 per year for the four-year period. The company's income tax rate is 30 percent per year. Use this information to revise the company's expected cash flow from this purchase. c. Compute the net present value of the purchase based on the revised cash flow forecast. Should Mr. Pike purchase the trucks? 10-2 Problem 10-18B Postaudit evaluation