Metro shuttle inc is considering investing in two new vans

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Reference no: EM13597246

Metro Shuttle Inc. is considering investing in two new vans that are expected to generate combined cash inflows of $28,000 per year. The van's combined purchase price is $91,000. The expected life and salvage value of each are four years and $21,000, respectively. Metro Shuttle has an average cost of capital of 14 percent.

Required.

A Calculate the net present value of the inventment opportunity

B Indicate whether the investment opportunity is expected to earn a return that is above or below the cost of capital and whether it should be accepted.

Reference no: EM13597246

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