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Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $34,000 on January...

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Accounting

Coast-to-Coast Inc. is considering the purchase of an additional delivery vehicle for $34,000 on January 1,20Y1. The truck is expected to have a 5-year life with an expected residual value of $7,000 at the end of 5 years. The expected additional revenues from the added delivery capacity are anticipated to be $54,000 per year for each of the next 5 years. A driver will cost $39,000 in 20Y1, with an expected annual salary increase of $3,000 for each year thereafter. The annual operating costs for the truck are estimated to be $2,000 per year.
Present Value of $1 at Compound Interest
Year 6%10%12%15%20%
10.9430.9090.8930.8700.833
20.8900.8260.7970.7560.694
30.8400.7510.7120.6580.579
40.7920.6830.6360.5720.482
50.7470.6210.5670.4970.402
60.7050.5640.5070.4320.335
70.6650.5130.4520.3760.279
80.6270.4670.4040.3270.233
90.5920.4240.3610.2840.194
100.5580.3860.3220.2470.162
a. Determine the expected annual net cash flows from the delivery truck investment for 20Y120Y5.

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