1 Queen of 4 10 points Lulu Hypermarket has a pickup truck that it uses to deliver the online ondors so their customers. The truck must be either overhauled or replaced with a new truck. The company has embled the following information Purchase cost (new) Remaining book value Overhaul needed now Annual cash operating costs Salvage value (now) Salvage value (five years from now) old Track New Truck $37,000 $47,000 $27,000 $26,000 $19,500 $10,000 $13,000 $18,000 $13,000 If the company keeps and overhauls its old delivery truck currently in use, then the truck will be usable for five more years. If a new truck is purchased, it will be used for five years, after which it will be traded in with another truck. The new truck would be diesel-operated, resulting in a substantial reduction in annual operating costs, as shown above. The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 10% discount rate. Use the following tables to determine the appropriate discount factor(s). Required: 1. What is the net present value of the "keep the old truck" alternative? ) 2. What is the net present value of the "purchase the new truck" alternative? 3. Should L EXHIBIT 14B-1 Present Value of $1; Table Summary: Table of present values of $1. Periods are listed in first column: 1-30 and 40. Columns are given for percents from 4 percent to 006 25 percent. 10% 11% 12% 13% 14% 15% 16 % 17 % 18 % 19% 20% 21% 22% 23% 24% 25% Question Comp 3. Should EXHIBIT 14B-1 Present Value of $1 Table Summary: Table of present values of $1. Periods are listed in first column: 1-30 and 40. Columns are given for percents from 4 percent to 25 percent. 2 Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13 % 14% 15% 16 % 17 % 18% 19% 20% 21% 22% 23% 24% 25% 1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.00 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.437 0.423 0.410 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0.328 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.262 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 3 + S 6 7 8 9 0 EXHIBIT 14B-2 Present Value of an Annuity of $1 in Arrears; ole Summary: Table of present values of an annuity of $1 in arrears. Periods are listed in first column: 1-30 and 40. Columns are given for percents from 4 percent to 25 percent. 586 706 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 8 9 10.1674.155 0.144 0.134 0.014 0.358 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 EXHIBIT 14B-2 Present Valse of an Annuity of S1 in Arrear Table Summary: Table of present values of an annuity of St in arrears. Periods are listed in first column: 1-30 and 40. Columns are given for percents from 4 percent to 25 percent Periods 4% 5% 6% 7% 8% 2 3 4 5 6 7 9% 10% 11% 12% 13 % 14% 15% 16 % 17 % 18 % 19% 20% 21% 22% 23% 24% 25% L 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.313 0.306 0.800 1.886 1.859 1.833 1.808 1.783 1.759 1.736 1.713 1.690 1.668 1.647 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1.457 1440 2.775 2.723 2.673 2.624 2.577 2.531 2.487 2.444 2.402 2.361 2.322 2.283 2.246 2.210 2.174 2.140 2.106 2.074 2.042 2.011 1.981 1952 3.630 3.546 3.465 3.387 3.312 3.240 3.170 3.102 3.037 2.974 2.914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2.494 2.448 2.404 2.362 4.452 4.329 4.212 4.100 3.993 3.890 3.791 3.696 3.605 3.517 3.433 3.352 3.274 3.199 3.127 3.058 2.991 2.926 2.864 2.803 2.745 2.689 5.242 5.076 4.917 4.767 4.623 6.002 5.786 5.582 5.389 5.206 4.486 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 5.033 4.868 4.712 4.564 4.423 4.288 4.160 4.039 3.922 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 6.733 6.463 6.210 5.971 5.747 5.535 5.335 5.146 4.968 4.799 4.639 4.487 4.344 4.207 4.978 3.954 3.837 3.726 3.619 3.518 3.421 3.329 7.435 7.108 6.802 6.515 6.247 5.995 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4.451 4.303 4.163 4.031 3.905 3.786 3.673 3.566 3.463- 10 8.111 7.722 7.360 7.024 6.710 6418 6.145 5.889 5.650 5.426 5.216 5.019 4.833 4.659 4.494 4.339 4.192 4.054 3.923 3.799 3.682 3.571 ulu Hypermarket keep the old truck or purchase the new one? 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