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Net Present Value Method for a...

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Accounting

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Net Present Value Method for a Service Company AM Express Inc. is considering the purchase of an additional delivery vehicle for $45,000 on January 1, 20Y1. The truck is expected to have a five- year life with an expected residual value of $7,000 at the end of five years. The expected additional revenues from the added delivery capacity are anticipated to be $70,000 per year for each of the next five years. A driver will cost $49,000 in 20Y1, with an expected annual salary increase of $4,000 for each year thereafter. The annual operating costs for the truck are estimated to be $2,000 per year. Present Value of $1 at Compound Interest 10% 12% 15% 20% 1 0.943 0.909 0.893 0.870 0.833 2 0.890 0.826 0797 0.756 0,694 3 0.840 0.751 0.712 0.658 0.579 4 0.792 0.683 0.636 0.572 0.482 0.747 0.621 0.567 0.497 0.402 0.705 0.564 .507 0.432 0.335 7 0.665 0.513 0.452 0.376 0.279 Year 6% 5 0.627 0.467 0.404 0.327 9 0.592 0.424 0.361 0.284 0.194 10 0.558 0.386 0.322 0.247 0.162 a. Determine the expected annual net cash flows from the delivery truck investment for 20Y1-20Ys. Annual Net Cash Flow

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