Question: could someone please help me? AM EXPRESS INC NET PRESENT VALUE METHOD FOR A SERVICE COMPANY HINT: A. 20Y1 $13,000 INSTRUCTTONS: A DETERMINE THE EXPECTED

could someone please help me? could someone please help me? AM EXPRESS INC NET PRESENT VALUE METHOD

AM EXPRESS INC NET PRESENT VALUE METHOD FOR A SERVICE COMPANY HINT: A. 20Y1 $13,000 INSTRUCTTONS: A DETERMINE THE EXPECTED ANNUAL NET CASH FLOWS FROM THE DELIVERY TRUCK INVESTMENT FOR 20Y1-20Y5 B. CALCULATE THE NET PRESENT VALUE OF THE INVESTMENT ASSUMING THAT THE MINIMUM DESIRED RATE OF RETURN IS 12%. USE THE PRESENT VALUE OF 1 TABLE APPEARING ON EXHIBIT 2 OF THIS CHAPTER C. IS THE ADDITIONAL TRUCK A GOOD INVESTMENT BASED ON YOUR ANALYSIS? C IS THERA IS 12% USE PRESENT VAAL NET CASH Ex. 25-8 (FIN MAN): Ex. 11-8 (MAN) 2041 2042 2043 2044 2045 Revenues..... Driver salary............ Operating costs....... (3,000) (3,000) (3.000) (3,000) (3.000) Residual value.......... Annual net cash flow..... Net Cash Flow [from part (A)) Present Value of $1 at 12% Present Value of Net Cash Flow 2043 2074 0.636 2045 0.567 Total present value of cash flows..... DEDUCT Investment in delivery truck............ ................... . (55.000) Net present value of delivery truck................................. The total present value of cash flows from the delivery truck Investment is less than the total purchase price of That is, the net present value is negative. Thus, this analysis does not support investment in the truck. SIS

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