Exercise $10-5$A $($Algo$)$ Determining net present value LO $10-2$

Thornton Company Is considering Investing in two new vans that are expected to generate combined cash Inflows of $$30,000$ per

year. The vans' combined purchase price is $$97,500.$ The expected life and salvage value of each are elght years and $$20,800,$

respectlvely. Thornton has an average cost of capital of $12$ percent. $($PV of $$1$ and PVA of $$1)$

Note: Use approprlate factor$($s$)$ from the tables provided.

Requlred

a$.$ Calculate the net present value of the Investment opportunity.

Note: Negative amount should be Indlcated by a minus sign. Round your Intermedlate calculations and final answer to $2$

decimal places.

b$.$ Indicate whether the Investment opportunity is expected to earn a return that is above or below the cost of capltal and whether it

should be accepted.