p12-4b - Name: Date: Instructor: Course: rd Managerial...

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FileName: 16255056a9360d3632dc83c9dc9da541aa2cae6f.xls, Tab: Problem P12-4B, Page 1 of 2, 12/28/2011, 19:03:30 Name: Date: Instructor: Course: $77,000 price tag for a new truck would represent a major expenditure for the company. Kalia Vang, owner of the company, has compiled the following estimates in trying to determine whether the garbage truck should be purchased. Initial cost $77,000 Estimated useful life 10 years Net annual cash flows from towing $12,000 Overhaul costs (end of year 4) $7,000 Salvage value $15,000 Additional savings from reduced operating costs 400 Annual savings from reduced maintenance costs 800 Additional annual net cash savings from reduced employee absence 500 Additional annual net cash inflows from recycling 300 The company's cost of capital is 10% Instructions: Using the original estimates, the net present value is calculated as follows: X = Present value of net annual cash flows Formula X PV Formula = Formula Title Amount X PV Formula = Formula Title Amount X PV Formula = Formula Formula Title Amount Net present value Formula The net present value based on the revised estimates is as follows: X = Present value of net annual cash flows Formula X PV Formula
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This note was uploaded on 12/28/2011 for the course ACCT 221 taught by Professor Leonarda.bacon during the Winter '07 term at CSU Bakersfield.

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p12-4b - Name: Date: Instructor: Course: rd Managerial...

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