Bend Manufacturers is considering investing in a new truck that will be used to deliver its custom-made furniture.Ron Shop,Controller of Bend Manufacturers,is considering a truck which will cost $80,000 and which has a useful life of 5 years.The new truck will save $9,600 per year in operating costs which are realized at the end of each year.Ron believes if the new truck is purchased it could be sold for $64,500 at the end of its useful life.Bend's required rate of return is 10%.What is the new truck's net present value?
$$\begin{array}{lllr}
\text{Type of cash flow} & \text{n Periods} & \text{i Interest rate} & \text{ Factor } \
\hline \text{PV of \$ 1} & 5 & 10 \% & .62092 \
\text{FV of \$ 1} & 5 & 10 \% & 1.61051 \
\text{PV ordinary annuity} & 5 & 10 \% & 3.79079 \
\text{FV ordinary annuity} & 5 & 10 \% & 6.10510 \
\text{PV annuity due} & 5 & 10 \% & 4.16986
\end{array}$$

Question

Bend Manufacturers is considering investing in a new truck that will be used to deliver its custom-made furniture.Ron Shop,Controller of Bend Manufacturers,is considering a truck which will cost $80,000 and which has a useful life of 5 years.The new truck will save $9,600 per year in operating costs which are realized at the end of each year.Ron believes if the new truck is purchased it could be sold for $64,500 at the end of its useful life.Bend's required rate of return is 10%.What is the new truck's net present value?
 $$\begin{array}{lllr} 
\text{Type of cash flow} & \text{n Periods} & \text{i Interest rate} & \text{ Factor } \
\hline \text{PV of  \$ 1}  & 5 & 10 \%  & .62092 \
\text{FV of  \$ 1}  & 5 & 10 \%  & 1.61051 \
\text{PV ordinary annuity} & 5 & 10 \%  & 3.79079 \
\text{FV ordinary annuity} & 5 &  10 \%  & 6.10510 \
\text{PV annuity due} & 5 &  10 \%  & 4.16986
\end{array}$$

Quizplus · Accepted Answer

The Answer of Bend Manufacturers is considering investing in a new truck that will be used to deliver its custom-made furniture.Ron Shop,Controller of Bend Manufacturers,is considering a truck which will cost $80,000 and which has a useful life of 5 years.The new truck will save $9,600 per year in operating costs which are realized at the end of each year.Ron believes if the new truck is purchased it could be sold for $64,500 at the end of its useful life.Bend's required rate of return is 10%.What is the new truck's net present value?
 $$\begin{array}{lllr} 
\text{Type of cash flow} & \text{n Periods} & \text{i Interest rate} & \text{ Factor } \
\hline \text{PV of  \$ 1}  & 5 & 10 \%  & .62092 \
\text{FV of  \$ 1}  & 5 & 10 \%  & 1.61051 \
\text{PV ordinary annuity} & 5 & 10 \%  & 3.79079 \
\text{FV ordinary annuity} & 5 &  10 \%  & 6.10510 \
\text{PV annuity due} & 5 &  10 \%  & 4.16986
\end{array}$$

Bend Manufacturers Is Considering Investing in a New Truck That