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1) You have an opportunity to purchase a delivery van that will last 4 years...

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Accounting

1) You have an opportunity to purchase a delivery van that will last 4 years and cost 20,000 dollars. The van will allow you to make home deliveries of food for your restaurant. The van will allow you to increase net sales (sales minus variable costs) by 15,000 per year. Calculate the NPV using an interest rate of 8%.

2) Your company is considering a machine purchase that will save 10,000 dollars per year in labor costs (includes benefits). It will last 5 years and cost 18,000 dollars to purchase the machine. In the third year, however, you do have to invest 6500 dollars to rebuild the motor (always needed in the third year only). Calculate NPV if the internal rate of return required by your company is 10%.

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