**Finch Delivery's Investment Analysis****Background:**Finch Delivery is a small company managing package transportation between New York and Chicago. They recently secured $5.5 million in cash capital and are exploring investment opportunities to expand their operations.**Investment Proposals:**1. **City Vans Expansion:** - **Proposed by:** Todd Payne, Operations Manager - **Cost:** $800,000 - **Expected Revenue Increase:** $340,000/year - **Useful Life:** 4 years - **Salvage Value:** $99,000 - **Working Capital Requirement:** $33,000 (recoverable at the end of 4 years)2. **Large Trucks Purchase:** - **Proposed by:** Oscar Vance, Chief Accountant - **Cost:** $880,000 - **Useful Life:** 4 years - **Salvage Value:** $74,000 - **Training Costs:** $17,000 - **Cash Flow Savings (by year):** - Year 1: $170,000 - Year 2: $314,000 - Year 3: $396,000 - Year 4: $450,000**Financial Evaluation:**Finch Delivery is considering a 16% desired rate of return to determine the Net Present Value (NPV) and Present Value Index (PVI) for both investment options.**Required Analysis:**- Calculate the NPV and PVI for both the city vans and large trucks.- Use the given cash flows and costs to evaluate which proposal offers a better financial return.- Round calculations and express answers in dollars for precision.**Instructions:**Use the appropriate present value factors for evaluation. Calculations should consider desired returns and cash flow specifics for precise financial assessments.**Tables/Diagrams:**- The table at the bottom indicates fields to record the NPV and PVI for each investment option: "Purchase of City Vans" and "Purchase of Trucks".

Capital budgeting is the process by which investors determine the value of a potential investment…

Finch Delivery is a small company that transports business packages between New York and Chicago. It operates a fleet of small vans that moves packages to and from a central depot within each city and uses a common carrier to deliver the packages between the depots in the two cities. Finch Delivery recently acquired approximately $5.5 million of cash capital from its owners, and its president, George Hay, is trying to identify the most profitable way to invest these funds. Todd Payne, the company's operations manager, believes that the money should be used to expand the fleet of city vans at a cost of $800,000. He argues that more vans would enable the company to expand its services into new markets, thereby increasing the revenue base. More specifically, he expects cash inflows to increase by $340,000 per year. The additional vans are expected to have an average useful life of four years and a combined salvage value of $99,000. Operating the vans will require additional working capital of $33,000, which will be recovered at the end of the fourth year. In contrast, Oscar Vance, the company's chief accountant, believes that the funds should be used to purchase large trucks to deliver the packages between the depots in the two cities. The conversion process would produce continuing improvement in operating savings and reduce cash outflows as follows. Year 1 $170,000 Year 2 $314,000 Year 3 $396,000 Year 4 $450,000 The large trucks are expected to cost $880,000 and to have a four-year useful life and an $74,000 salvage value. In addition to the purchase price of the trucks, up-front training costs are expected to amount to $17,000. Finch Delivery's management has established a 16 percent desired rate of return. (PV of $1 and PVA of $1) Note: Use appropriate factor(s) from the tables provided. Required a.&b. Determine the net present value and present value index for each investment alternative. Note: Round your Intermediate calculations and final answers to 2 decimal places. Enter your answer in dollars and not in millions.