Todd Payne, the company’s operations manager, believes that the money should be used to expand the fleet of city vans at

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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
$730,000. 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 $290,000 per year. The additional vans are expected to
have an average useful life of four years and a combined salvage
value of $90,000. Operating the vans will require additional
working capital of $32,000, 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.
The large trucks are expected to cost $810,000 and to have a
four-year useful life and a $90,000 salvage value. In addition to
the purchase price of the trucks, up-front training costs are
expected to amount to $12,000. Zachary Delivery’s management has
established a 8 percent desired rate of return. (PV of $1 and PVA
of $1) (Use appropriate factor(s) from the tables
provided.)

Required