A-3 Indigo Corporation is considering purchasing a new delivery truck. The truck has many advantages over the com(not the least of which is that it runs). The new truck would cost $56,295. Because of the increased capacity, redecosts, and increased fuel economy, the new truck is expected to generate cost savings of $8,100. At the end of eigcompany will sell the truck for an estimated $28,200. Traditionally, the company has used a general rule that it sheproposal unless it has a payback period that is less than 50% of the asset's estimated useful life. Kevin Allen, a newsuggested that the company should not rely only on the payback approach but should also use the net present valuevaluating new projects. The company's cost of capital is 8%.h(a)Calculate the cash payback period and net present value of the proposed investment. (If the net present value is negatsnegative sign preceding the number e.g. -45 or parentheses e.g. (45). Round cash payback period to 2 decimal place, eg 125calculation purposes, use 5 decimal places as displayed in the factor table provided, e.g. 1.25124 and net present value to 0 de.g. 5,275.)

Payback period is the length of time required to recover the cost of Investment. It is calculated…

Answered: Indigo Corporation is considering…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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