The plan under consideration by the board is to replace six full-size buses with nine minibuses, each of which would cover a much shorter route than a full-size bus. The bus drivers in this rural school district are part-time employees whose compensation costs the school district $18,000 per year for each driver. In addition to the drivers compensation, the annual costs of operating and maintaining a full-size bus amount to $60,000. In contrast, the board projects that a minibus will cost only $30,000 annually to operate and maintain. A minibus driver earns the same wages as a full-size bus driver. The school district controller has estimated that it will cost the district $20,104, initially, to redesign its bus routes, inform the public, install caution signs in certain hazardous locations, and retrain its drivers. A minibus costs $27,000, whereas a full-size bus costs $120,000. The school district uses straightline depreciation for all of its long-lived assets. The board has two options regarding the five fullsize buses. First, the buses could be sold now for $15,000 each. Second, the buses could be kept in reserve to use for field trips and out-of-town athletic events and to use as backup vehicles when buses break down. Currently, the board charters buses from a private company for these purposes. The annual cost of chartering buses amounts to $33,000. The school district controller has estimated that this cost could be cut to $5,000 per year if the five buses were kept in reserve. The five full-size buses have six years of useful life remaining, either as regularly scheduled buses or as reserve buses. The useful life of a new minibus is projected to be six years also. The school district uses a hurdle rate of 16% on all capital projects.

1. Compute the net-present-value of purchasing the minibuses.