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Calculate the net present value of project for hughie inc

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Hughie Inc. plans to purchase a new truck. The truck costs $98,000 and is expected to have a useful life of eight years, with a residual value of $8,500. Savings in cash operating costs are expected to be $31,250 per year. However, additional working capital of $10,000 is needed to keep the machine running efficiently. This working capital will be released at the end of the project. Hughie's required rate of return is 14%.

Problem a. What is the project's payback? If Hughie has a policy of only accepting projects that payback within four years, would this project be accepted?

Problem b. Calculate the net present value of this project and make a recommendation to Hughie as to whether they should purchase the new truck.

Reference no: EM132975759

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