The management of concrete limited is currently considering the purchase of a new cement truck costing $150,000. Concrete limited intends to keep the truck for five years before trading it in one new one. the truck is estimated salvage value at the end of the five years is approximately $25000. The truck is expected to increase net cash flows by

Sep 8, 2023

The management of concrete limited is currently considering the purchase of a new cement truck costing $150,000. Concrete limited intends to keep the truck for five years before trading it in one new one. the truck is estimated salvage value at the end of the five years is approximately $25000. The truck is expected to increase net cash flows by $37500 during each year of their life.

a. Calculate payback period for the proposed investment?

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The management of concrete limited is currently considering the purchase of a new cement truck costing $150,000. Concrete limited intends to keep the truck for five years before trading it in one new one. the truck is estimated salvage value at the end of the five years is approximately $25000. The truck is expected to increase net cash flows by
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b. Calculate the net present value of the proposed investment, assuming a discount rate of 12%?

Should the management of concrete limited accept this proposal under payback and NVP analysis?

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