Using the time value of money and a 5-year life for this project, what is the present value of all of I.M.’s benefits?
You decide to help I.M. with his analysis. A good fax machine costs $500 and functions properly for 5 years. The phone company charges $300 for installing a new line and $60 a month for the line. A new delivery van costs $20,000 and can be financed for 60 months with a $4,000 down payment. I.M.’s bank will finance the van at 5.5 percent compounded monthly, and you calculated his weighted average cost of capital at 8 percent. You found that a 5-year-old van of this model sells for $5,000. After discussing the business venture with several retired restaurant owners at the local SCORE office, you believe that I.M., after paying his food costs, will increase his breakfast and lunch trade by $2,000 a month. I.M. can hire a part-time driver for $600 a month. The vehicle
Using the time value of money and a 5-year life for this project, what is the present value of all of I.M.’s benefits?
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