Question: (Multiple methods) Bubbas Meat Market is considering buying a delivery truck at a cost of $38,000. Presently, Bubba relies on a delivery service to deliver

(Multiple methods) Bubba’s Meat Market is considering buying a delivery truck at a cost of $38,000. Presently, Bubba relies on a delivery service to deliver his products to area grocers and restaurants. The truck is expected to last 6 years and have a $5,000 salvage value. Annual operating savings (in delivery costs) are expected to be $10,000 for each of the first 2 years, $8,000 for each of the next 2 years, and $7,000 for the last 2 years. The company’s cost of capital is 11 percent and this rate was set as the discount rate.

a. Calculate the payback period (ignore tax).

b. Calculate the net present value (ignore tax).

c. Calculate the profitability index (ignore tax).

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