Pronto Delivery Is Contemplating an Investment in a Delivery Truck

question 34

Multiple Choice

Pronto Delivery is contemplating an investment in a delivery truck. The estimate of the project's price is $22,000. The delivery truck will have a life of 5 years and have a salvage value of $2,000. Annual net cash flows from the five years of operations are expected to be $6,000. If Pronto's applicable discount rate is 10%, what is the net present value of this project? Is the project acceptable?

• A) NPV = -$1,986.60 and is unacceptable
• B) NPV = -$1,986.60 and is acceptable
• C) NPV = $1,986.60 and is unacceptable
• D) NPV = $1,986.60 and is acceptable
• E) None of the above

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