Answer Happy

Carla Vista’s Auto Care is considering the purchase of a new tow
truck. The garage doesn’t currently have a tow truck, and the
$60,040 price tag for a new truck would represent a major
expenditure. Carla Vista Austen, owner of the garage, has compiled
the following estimates in trying to determine whether the tow
truck should be purchased.
Carla Vista's Auto Care is considering the purchase of a new tow truck. The garage doesn't currently have a tow truck, and the $60,040 price tag for a new truck would represent a major expenditure. Carla Vista Austen, owner of the garage, has compiled the following estimates in trying to determine whether the tow truck should be purchased. Initial cost $60,040 Estimated useful life 8 years Net annual cash flows from towing $7,970 Overhaul costs (end of year 4) $5,970 Salvage value $12,000 Carla Vista's good friend, Rick Ryan, stopped by. He is trying to convince Carla Vista that the tow truck will have other benefits that Carla Vista hasn't even considered. First, he says, cars that need towing need to be fixed. Thus, when Carla Vista tows them to her facility, her repair revenues will increase. Second, he notes that the tow truck could have a plow mounted on it, thus saving Carla Vista the cost of plowing her parking lot. (Rick will give her a used plow blade for free if Carla Vista will plow Rick's driveway.) Third, he notes that the truck will generate goodwill; people who are rescued by Carla Vista's tow truck will feel grateful and might be more inclined to use her service station in the future or buy gas there. Fourth, the tow truck will have "Carla Vista's Auto Care" on its doors, hood, and back tailgate-a form of free advertising wherever the tow truck goes. Rick estimates that, at a minimum, these benefits would be worth the following. Additional annual net cash flows from repair work $3,010 Annual savings from plowing 760 Additional annual net cash flows from customer "goodwill" 960 Additional annual net cash flows resulting from free advertising 750 The company's cost of capital is 9%.
(b) Your answer is partially correct. Calculate the net present value, incorporating the additional benefits suggested by Rick. (If the net present value is negative, use either a negative sign preceding the number e.g.-45 or parentheses e.g. (45). Round answer to o decimal places, e.g. 125. For calculation purposes, use 5 decimal places as displayed in the factor table provided.) Net present value $ - 14,134 Should the tow truck be purchased? The tow truck should be purchased.