anhoe Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck (not the least of which is that it runs). The new truck would cost $57,186. Because of the increased capacity, reduced maintenance costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,100. At the end of eight years, the company will sell the truck for an estimated $27,500. Traditionally, the company has used a general rule that it should not accept a proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Gary Smith, a new manager, has suggested that the company should not rely only on the payback approach but should also use the net present value method when evaluating new projects. The company's c
Ivanhoe Corporation is considering purchasing a new delivery truck. The truck has many advantages over the company's current truck
(not the least of which is that it runs). The new truck would cost $57,186. Because of the increased capacity, reduced maintenance
costs, and increased fuel economy, the new truck is expected to generate cost savings of $8,100. At the end of eight years, the
company will sell the truck for an estimated $27,500. Traditionally, the company has used a general rule that it should not accept a
proposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Gary Smith, a new manager, has
suggested that the company should not rely only on the payback approach but should also use the
evaluating new projects. The company's cost of capital is 8%.Calculate net present value and cash payback period
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