Reference no: EM132490369
Question - Jane's Auto Care is considering the purchase of a new tow truck. The garage doesn't currently have a tow truck, and the $60,010 price tag for a new truck would represent a major expenditure. Jane Austen, owner of the garage, has compiled the estimates shown below in trying to determine whether the tow truck should be purchased.
Initial cost $60,010
Estimated useful life 8 years
Net annual cash flows from towing $7,970
Overhaul costs (end of year 4) $6,000
Salvage value $12,010
Jane's good friend, Rick Ryan, stopped by. He is trying to convince Jane that the tow truck will have other benefits that Jane hasn't even considered. First, he says, cars that need towing need to be fixed. Thus, when Jane tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Jane the cost of plowing her parking lot. (Rick will give her a used plow blade for free if Jane will plow Rick's driveway.) Third, he notes that the truck will generate goodwill; people who are rescued by Jane's tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have "Jane's Auto Care" on its doors, hood, and back tailgate-a form of free advertising wherever the tow truck goes. Rick estimates that, at a minimum, these benefits would be worth the following.
Additional annual net cash flows from repair work $3,000
Annual savings from plowing 760
Additional annual net cash flows from customer "goodwill" 950
Additional annual net cash flows resulting from free advertising 750
The company's cost of capital is 9%.
Required -
1. Calculate the net present value, ignoring the additional benefits described by Rick.
2. Calculate the net present value, incorporating the additional benefits suggested by Rick.
3. Suppose Rick has been overly optimistic in his assessment of the value of the additional benefits. At a minimum, how much would the additional benefits have to be worth in order for the project to be accepted?
|
Determining the density of the al
: Use the yield strength determined for the three materials, determine which will be the lightest to carry a given load of, for example, 250 N.
|
|
Is the statement correct
: "Sales doubled in 5 years. This represents a growth of 100% in 5 years; so dividing 100% by 5, we find the growth rate to be 20% per year." Is statement correct
|
|
What is the wheel angular speed
: A remote-controlled car's wheel accelerates at 22.1 rad/s2. If the wheel begins with an angular speed of 11.0 rad/s, what is the wheel's angular
|
|
What is the principal payment
: Completer the first month What is the Total payment? What is the Interest Payment? What is the Principal Payment? What is the Balance of Principal
|
|
Calculate the net present value
: Additional annual net cash flows from repair work $3,000. Calculate the net present value, ignoring the additional benefits described by Rick
|
|
Derive an expression for the time tmax
: Consider the three component decay chain in which N2(0) = 0. Derive an expression for the time tmax at which N2(t) reaches a maximum.
|
|
What is comfy home net cash from operating activities
: The company did not take out any new loans, but paid off part of an existing loan with cash. What is Comfy Home's net cash from operating activities?
|
|
Find the final temperature
: A 38 g block of ice is cooled to -84 ?C. It is added to 579 g of water in an 73 g copper calorimeter at a temperature of 22?C. Find the final temperature.
|
|
Prepare the journal entries to record the exchange
: For each of the four independent situations, prepare the journal entries to record the exchange on the books of each company
|