What is the present worth of the van

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Delta Dawn’s Bakery is considering purchasing a new van to deliver bread. The van will cost $21,500. Two-thirds ($14,333) of this cost will be borrowed. The loan is to be repaid with four equal annual payments (first payment at t = 1) based on an interest rate of 4%/year. It is anticipated that the van will be used for 6 years and then sold for a salvage value of $3,000. Annual operating and maintenance expenses for the van over the 6-year life are estimated to be $700 per year. If the van is purchased, Delta will realize a cost savings of $3,200 per year. Delta uses a MARR of 6%/year. What is the present worth of the van?

Reference no: EM13737195

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