Indigo Corporation is considering purchasing a new delivery truck. The truck has many advantages over the com (not the least of which is that it runs). The new truck would cost $56,295. Because of the increased capacity, rede costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,100. At the end of eig company will sell the truck for an estimated $28,200. Traditionally, the company has used a general rule that it sh proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Kevin Allen, a new suggested that the company should not rely only on the payback approach but should also use the net present valu evaluating new projects. The company's cost of capital is 8%. h (a) Calculate the cash payback period and net present value of the proposed investment. (If the net present value is negati negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round cash payback period to 2 decimal place, eg 12.5 calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and net present value to 0 d e.g. 5,275.)
Indigo Corporation is considering purchasing a new delivery truck. The truck has many advantages over the com (not the least of which is that it runs). The new truck would cost $56,295. Because of the increased capacity, rede costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,100. At the end of eig company will sell the truck for an estimated $28,200. Traditionally, the company has used a general rule that it sh proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Kevin Allen, a new suggested that the company should not rely only on the payback approach but should also use the net present valu evaluating new projects. The company's cost of capital is 8%. h (a) Calculate the cash payback period and net present value of the proposed investment. (If the net present value is negati negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round cash payback period to 2 decimal place, eg 12.5 calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and net present value to 0 d e.g. 5,275.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Indigo Corporation is considering purchasing a new delivery truck. The truck has many advantages over the com
(not the least of which is that it runs). The new truck would cost $56,295. Because of the increased capacity, rede
costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,100. At the end of eig
company will sell the truck for an estimated $28,200. Traditionally, the company has used a general rule that it she
proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Kevin Allen, a new
suggested that the company should not rely only on the payback approach but should also use the net present valu
evaluating new projects. The company's cost of capital is 8%.
h
(a)
Calculate the cash payback period and net present value of the proposed investment. (If the net present value is negats
negative sign preceding the number e.g. -45 or parentheses e.g. (45). Round cash payback period to 2 decimal place, eg 125
calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and net present value to 0 d
e.g. 5,275.)
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