Net Present Value Method for a Service Company

AM Express Inc. is considering the purchase of an additional delivery vehicle for $$34,000$ on January $1,20Y1.$ The truck is expected to have a five$-$year life with an expected residual value of $$6,000$ at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $$56,000$ per year for each of the next five years. A driver will cost $$40,000$ in $20Y1,$ with an expected annual salary increase of $$3,000$ for each year thereafter. The annual operating costs for the truck are estimated to be $$2,000$ per year.

Present Value of $$1$ at Compound Interest

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