Ace Movers is thinking about buying a truck. In the first year it expects to earn...

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Finance

Ace Movers is thinking about buying a truck. In the first yearit expects to earn $9,000 and then during the second year it willbe retro-fitted so it can burn natural gas. After that it will earn$14,000 per year for third, fourth and fifth years. Its cash flowscan be summarized as follows:
Year
Cash Flow
0
-26,000
1
9,000
2
-6,000
3
14,000
4
14,000
5
14,000
Ace Mover's cost of capital (the interest rate on money broughtinto the firm) is 6.00%. Because the loan will be paid off as soonas possible this rate can be considered the "reinvestmentrate."
A) What is the payback period for the truck?
B) What is the discounted payback period for the truck?
C) What is the net present value for the truck?
D) What is the internal rate of return for the truck? Pleasecarry out your answer to two digits to the right of the decimalplace.
E) What is the modified internal rate of return for the truck?Please carry out your answer to two digits to the right of thedecimal place.
F) Suppose that investors decided that they required a 10:00%cost of capital instead of 6.00%. Would the truck be a goodinvestment? Yes or No.

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Ace Movers is thinking about buying a truck. In the first yearit expects to earn $9,000 and then during the second year it willbe retro-fitted so it can burn natural gas. After that it will earn$14,000 per year for third, fourth and fifth years. Its cash flowscan be summarized as follows:YearCash Flow0-26,00019,0002-6,000314,000414,000514,000Ace Mover's cost of capital (the interest rate on money broughtinto the firm) is 6.00%. Because the loan will be paid off as soonas possible this rate can be considered the "reinvestmentrate."A) What is the payback period for the truck?B) What is the discounted payback period for the truck?C) What is the net present value for the truck?D) What is the internal rate of return for the truck? Pleasecarry out your answer to two digits to the right of the decimalplace.E) What is the modified internal rate of return for the truck?Please carry out your answer to two digits to the right of thedecimal place.F) Suppose that investors decided that they required a 10:00%cost of capital instead of 6.00%. Would the truck be a goodinvestment? Yes or No.