Sandhill Corporation is considering purchasing a new delivery truck. The truck has many advantages over the...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Sandhill Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $55,040. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,600. At the end of 8 years, the company will sell the truck for an estimated $28,900. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the asset's estimated useful life. Larry Newton, a new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company's cost of capital is 8%. Click here to view the factor table. (a) Compute the cash payback period and net present value of the proposed investment. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125. Round answer for Payback period to 1 decimal place, eg. 10.5. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Cash payback period years Net present value $ (b) Does the project meet the company's cash payback criteria? Sandhill Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $55,040. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,600. At the end of 8 years, the company will sell the truck for an estimated $28,900. Traditionally the company has used a rule of thumb that a proposal should not be accepted unless it has a payback period that is less than 50% of the asset's estimated useful life. Larry Newton, a new manager, has suggested that the company should not rely solely on the payback approach, but should also employ the net present value method when evaluating new projects. The company's cost of capital is 8%. Click here to view the factor table. (a) Compute the cash payback period and net present value of the proposed investment. (If the net present value is negative, use either a negative sign preceding the number eg-45 or parentheses eg (45). Round answer for present value to 0 decimal places, e.g. 125. Round answer for Payback period to 1 decimal place, eg. 10.5. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Cash payback period years Net present value $ (b) Does the project meet the company's cash payback criteria?
Expert Answer:
Posted Date:
Students also viewed these accounting questions
-
Use a software package such as Matlab or Mathematica to program the example described in section 7.3. (a) Assume the environmental regulator ignores the impact on the labor market and sets an...
-
A survey of teachers found that two of the most important rewards were the belief that their work was important and a feeling of accomplishment. Is this consistent with Hackman and Oldhams job...
-
Ray Panneton, president of Okus Designs, met with his CFO and vice president of marketing to discuss the profitability of the companys top 10 customers. These customers account for 80% of the...
-
Total quality management (TQM) is based on four tenets of (1) continuous improvement, (2) employee participation, (3) product/service improvement, and (4) supplier relationships. Review each of the...
-
The campaign manager for a politician who is running for reelection to a political office is planning the campaign. Four ways to advertise have been selected: TV ads, radio ads, billboards, and...
-
What are the strengths and weaknesses of these capital budgeting methods? Match the term with the strengths and weaknesses listed for each of the four capital budgeting models. Capital Budgeting...
-
Please refer to the requirements and go through all the imagesfor exact req??????? The adjusted trial balance of Edmond Real Estate Appraisal at June 30, 2018, follows: (Click the icon to view the...
-
Evaluate the value that technology offers organizations and to customers. Are technologies enablers of innovation? Next, analyze innovation. How is innovation developed in response to customer needs?...
-
A child's ball (a thin hollow uniform sphere) of mass 34.8 g and radius 0.141 m starts from rest and rolls without slipping down an inclined plane of vertical height 6.82 m. What is the angular speed...
-
What is output to the console? function getSum(scores) { } if (!Array.isArray(scores)) { } throw new TypeError("Array error"); if (scores.length != 2) { } throw new RangeError("Length error"); return...
-
A white light point source is placed along the optical axis of a convex lens at a distance of 0 . 4 m from the lens. The refractive indices of the lens for red and blue light are 1 . 5 2 and 1 . 5 4...
-
Evaluate the role of technology in enhancing the operations and customer experience in a petro retailing business. Discuss specific technological advancements, such as smart fuel dispensers, mobile...
-
Find the equation of the tangent plane to the parametric surface given by the following equations at the point (0, 1, 0): x=u-v, y=u^2, z=u-v^2
-
For a Poisson process of rate , the Bernoulli arrival approximation assumes that in any very small interval of length , there is either 0 arrivals with probability 1- or 1 arrival with probability ....
-
Describe what a badly run stock exchange would be like and explain how society would be poorer as a result.
-
Many countries are encouraging small investors to buy quoted shares. Why might they be doing this? Write an essay to include a discussion of the societal benefits of a stock exchange.
-
Frame-up plc is considering a flotation on the Main Market of the London Stock Exchange. The managing director has asked you to produce a 1,000-word report explaining the advantages of such a move.
Study smarter with the SolutionInn App