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What is the new truck net present value

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Question - Sheridan Manufacturers is considering investing in a new truck that will be used to deliver its custom-made furniture. Steven Shop, Controller of Sheridan Manufacturers, is considering a truck which will cost $91200 and which has a useful life of 5 years. The new truck will save $10944 per year in operating costs which are realized at the end of each year. Steven believes if the new truck is purchased it could be sold for $73530 at the end of its useful life. Sheridan's required rate of return is 8%.

Type of cash flow

Periods

Interest rate

Factor

PV of $1

5

8%

0.6806

FV of $1

5

8%

1.4693

PV ordinary annuity

5

8%

3.9927

FV ordinary annuity

5

8%

5.8666

PV annuity due

5

8%

4.3121

Required - What is the new truck's net present value?

Reference no: EM133179591

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