Best Bakery (BB) is considering purchasing a new van to deli…
Best Bakery (BB) is considering purchasing a new van to deliver their product. The van will cost $23,800. Forty (40) percent 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 9%/year. It is anticipated that the van will be used for 6 years and then sold for a salvage value of $7,300. Annual operating and maintenance expenses for the van over the 6-year life are estimated to be $730 per year. If the van is purchased, BB will realize a cost savings of $3,250 per year. BB uses a MARR of 12%/year. What is the present worth of the van?