Net present value method for a service company

Coast$-$to$-$Coast Inc. is considering the purchase of an additional delivery vehicle for $$22,000$ on January $1,20$Y$1.$ The truck is expected to have a $5-$year life with an expected residual value of $$5,000$ at the end of $5$ years. The expected additional revenues from the added delivery capacity are anticipated to be $$48,000$ per year for each of the next $5$ years. A driver will cost $$35,000$ in $20$Y$1,$ 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.

a$.$ Determine the expected annual net cash flows from the delivery truck investment for $20$Y$1-20$Y$5.$

Annual Net Cash Flow

b$.$ Compute the net present value of the investment, assuming that the minimum desired rate of return is $15\%.$ Use the table of the present value of $$1$ presented above. When required, round to

the nearest dollar. If required, use the minus sign to indicate a negative net present value.

c$.$ Is the additional truck a good investment based on your analysis?

$,$ because the net present value is Present Value of $$1$ at Compound Interest Present Value of $$1$ at Compound Interest a$.$ Determine the expected annual net cash flows from the delivery truck investment for $20$Y$1-20$Y$5.$

Annual Net Cash Flow

b$.$ Compute the net present value of the investment, assuming that the minimum desired rate of return is $15\%.$ Use the table of the present value of $$1$ presented above. When required, round to

the nearest dollar. If required, use the minus sign to indicate a negative net present value.

c$.$ Is the additional truck a good investment based on your analysis?

$,$ because the net present value is