2

3 Bilboa Freightlines, S.A.. of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information: pped Cook Present Truck New Truck Purchase cost new $ 23,000 $ 28,000 Remaining book value $ 10,000 Overhaul needed now $ 9,000 Annual cash operating costs $ 11,500 $ 8,000 Salvage value-now $ 5,000 Salvage value-five years from now $ 4,000 $ 4,000 If the company keeps and overhauls its present delivery truck, 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 on 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-tine basis. All investment projects are evaluated using a 9% discount rate. Click here to view Exhibit 148-1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. 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 Bilboa Freightlines keep the old truck or purchase the new one? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the net present value of the "keep the old truck alternative? (Enter negative ame final answer to the nearest whole dollar amount.) Net present value Required 2 > Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information: Present Truck New Truck Purchase cost new $ 23,000 $ 28,000 Remaining book value $ 10,000 Overhaul needed now $ 9,000 Annual cash operating costs $ 11,500 $ 8,000 Salvage value-now $ 5,800 Salvage value-five years from now $ 4,000 $ 4,000 If the company keeps and overhauls its present delivery truck, 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 on 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 9% discount rate. Click here to view Exhibit 148-1 and Exhibit 14B-2. to determine the appropriate discount factor(s) using tables. 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 Bilboa Freightlines keep the old truck or purchase the new one? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the net present value of the "purchase the new truck" alternative? (Enter negativ your final answer to the nearest whole dollar amount.) Net present value Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced with a new truck. The company has assembled the following information: Present Truck New Truck Purchase cost new $ 23,000 $ 28,000 Remaining book value $ 10,000 Overhaul needed now $ 9,000 Annual cash operating costs $ 11,500 $ 8,000 Salvage value-now $5,000 Salvage value-five years from now $ 4,000 $ 4,000 If the company keeps and overhauls its present delivery truck, 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 on 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 9% discount rate. Click here to view Exhibit 14B-1 and Exhibit 14B-2. to determine the appropriate discount factor(s) using tables. 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 Bilboa Freightlines keep the old truck or purchase the new one? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Should Bilboa Freightlines keep the old truck or purchase the new one? Purchase the new truck Keep the old truck EXHIBIT 146-1 Present Value of SI: (+ Periods 4% 6% 79 5% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 1 0462 0.9526943 8.955 0.926 0917 099 0.01 093 OSS OTTON 08620155 05400353 B5 D830 053 ODS ON 2 0.925 0.907 0.90 0.8730357 0842 0.06 GX120.797 0.753 0.7 0.756 0.7436.731 0.71% 0.06 0.014 0.633 0.672 0.661 0.650 0,640 3 0.889 0.864 0.840 0816 0.74 0.772 0.751 0.731 0.712 01930650.6580681 0.64 0.609 0.593 0579 0.56 0.551 0.537 0.524 0.512 4 0.835 0.623 0.792 0.765 0.755 0.705 063 0659 0.656 6613 0.592 0.972 0.5520.534 0.516 0.19 0.482 0.467 0.451 0.437 0.423 0.410 5 0.822 0.784 0.747 0.713 0681 0650 06 593 567 5519 090.76 0.456 0.37 0.419 0.002 386 3700355 0.341 0.328 0.790 0.745 0.705 0.6660.630 595 056 055 0.507 0.480 0.256 0432 0.410 0.30000700352 0335 0.319 .303 0.289 0.275 0.262 7 0.760 0.711 0665 0.6230 58.0.547 0.313 0.4520:4520425 0.200 0.375 0354 0.333 314 0.296 0.299 0.263 0.349 0.23 0.222 0.210 0.731 0.672 0.62705540502 04670434 404 375 351 327 30510.385 0.256 2490.2330 218 0.204 0.19 0.119 0,168 0.703 0,645 0.59205445000 460 0424 0.39 0.11 0.13303030394230381 0.025 0.29 0.194 IND 0.167 O 155 0.144 0.134 10 0.676 0.614 0.55 0.5 0.463 0.422 0.3860-35203220295 02200347027 0.20 0.19 0.176 0.162 0.149 0.137 0.126 0.116 0.107 11 0.650 OS$0.927 0.475 0.429 0.388.330 3317 0.287 0261 0.237 0215 0.1950.17 0.162 0.148 0.13 0.123 0.112 0.103 0.094 0,086 0.625 0.557 0.497 0.4140397 0156 0319 0.386 257 0231 0,308 0.587 0.165 0.15 0.17 0.124 0.112 0.1020.092 0083 0.076 0.069 12 0.001 0.50 0.400 0.415 0.368 0.126.290 258 0.229 03040.10.160.145 0.1300.116 0.10+ 0,093 0.064 0.075 0.068 0.061 0.055 14 0.5770 So 0.442 03 0.340299 0.363 2320.305 18 0.100.141 0.125 0.11 0.09 0.08 0.07 0.00 0.062 0.05 0.049 0.044 15 0.555 0.461 0,417 0.32 0315 0.275 0.29 0.209 0.183 0.16 0.140 0.121.105 0,095 0.054 0.074 0.065 0.05 0.051 0.045 0.040 0.035 16 0.534 0.45 0.394 0.33 0.292 0.252 0.2 0.18 0.163 0.141 0.123 107.09 0.0 0.071 0.062 0.054 0.047 0.042 0.036 0.0320.02 17 0:13 0,436 0371 03170270 02:10.198 0.70 0.146 0.125 0.105 0.025 0.00 0.00 0.00 0.052 0.045 0.039 0.034 0.030 0.026 0.023 18 0.894 0.416 0.350 0296 0.250 0212 0.180 2153 0.130 111 095190,099 0.081 0044 0.038 0032 0.028 0.034 0.021 0,018 19 0.475 0.396 0331 0.277 0232 0.1940 164 0.138 0.116 0.098003 0.07000600051 0,043 0.0370031 0.007 0.023 0.030 0.017 0.014 20 0:456 0.377 0312 0.250.250.178 0149 0.134104 DKT.073 0.061 Sl 0.00 0.017 0.031 0.025 0.002 0.019 0016 0.014 0.012 21 0.439 0.19 0.299 0.34201900.164 0.135 0.112 0.093 0077 0.060053 DL 0.037 0.031 0.025 0.022 0.08 0.01s 0013 2011 0.009 23 0.422 0.1430.278 0236 0.1840.1500.133.101.03 00 0.05666450035 0.033 0.0360.002 0.0180.15 0.03 0.0110.009 0.007 23 0.06 0.326 0.22 0.21 0.170 0.13 112 0.09 0.014 0.00 0.00 0.00 0.00 0.007 0.002 001800150012 0.00 0.00 0.007 0.006 24 0.390 0.310 0.247 0.19 0.19 0.12601000065 0053 0.0430050025 0.025 0.01900150013 0010 0.CON 007 0.006 0.005 25 0.375 0.295 0.233 0.14 0.146 0.116 0.092 0.07 0.059 0.047 0.058 630 0004 0.020 06 03 0.00 0.00 0.007 0.006 0.00 0.004 26 0.361 0.281 0.220 0.172 US 0.106 0.054 0.066 053 004 0.033 0.005 0.021 0.01 0.014 0.0110.099 0.007 0.006 0.005 0.004 0,003 27 0.347 0.20 0.207 0.161 0.125 0.09 0.06 0.000 0.07 0.037 099 0.003 0.05 0.014 0.11 0.00 0.00 0.00 0.005 0.0040.00 0.00 25 0.333 0.250.1960.10 0.116 0.09 0.069 0.05 0.042 033 0035 0.030016 0.0120.01 0.00 0.00 0.00 0.0040.003 0.002 0,002 29 0.321 0.24 0.185 0.141 0.1070.6820.0630.048 0.0370 0.3 0.0172 0.014 0.011 0.008 0.005 0.005 0.000 0.00 0.003 0.002 0.002 10 0308 0.231 0.1740131 0.09 0.075005 004 0033 0005 0.000 0.00012 0.00 0.00 0.00 0.00 0.00 0.00 0.002 0.002 0.001 40 0.208 0.14 0.097 0.067 0.046 0.092 0.002 0.05 0.611 0.008 0.005 0.0040.003 0.002 0.000 0.00 0.00 0.000 0.000 0.000 0.000 0.000 EXHIBIT 14B-2 Present Value of an Annuity of S1 in Arrears: 1 1+r" Periods 4% 7% 8% 9% 1046 11% 12% 13% 14% 15% 16% 1794 18% 1996 2004 21% 22% 239. 24% 25% 0962095209530.935 096 0917 0.9090901 0.8930.885 08770870 0.42 0.255 08470.840 0.835 036 0830 0.8130.806 2 1.886 1.8591.8331 1.783 1.759 1.7361.7131.6901.668 1 647 1.426 1.5 1.5851.566 1.5471.528 1.5091 492 1.474 1.4571440 1 2.775 2.723 2673 2,624 2.5772531 2.487 2.444 2.402 2361 2322 223 2246 2210 2.174 2.140 2.106 2.074 2.042 2.0111951 1952 1 3.630 3.546 3.465 3.357 3.312 3.240 3.170 3.102 3037 2974 2.914 2.855 2.18 2.743 2.690 2.619 2.549 2540 2.494 2.448 2404 2362 5 4452 4.329 4212 4.100 3.993 3.890 3.791 3.696 3.60 3.517 3.433 3.392 3.274 3:1993.127 3,05 2.991 2.926 2.864 2.803 2.745 2.689 5.242 5.076 4917 4.767 4.623 4486 4355 4.231 4.111 3.9983.889 3.784 3685 3589 3.498 3,410 3326 3.245 3.167 3.092 3.020 2951 7 6.002 3.786 5382 5.359 3.206 5.033 48684.712 4.564 4423 4285 4.160 4.039 3.922 3.812 3.705 3.605 3.508 3.416 3.327 1242 3.161 6.733 6.463 6210 5971 5.7475.535 5335 5.146 4.968 47994639 448743444.207 4.078 3.954 3.837 3.726 3.619 3.518 3421 3.329 7435 7108 6.302 6.515 6.2475995 5.739 3.537 5.325 5.732 49464.77241074451 4.303 4.1634.001 3.905 3.786 3.673 3566 3463 10 &111772273607024 6710 6.418 6.149 589 5.680 5.426 5216 9.019 433 4659 4.494 4319 4.192 4.054 3.923 3.799 360 3.571 11 8.760 8.3067.887 7.499 7.139 6805 6195 6.207 5.938 5687 5.453 5.234 5.429 4836 4.656 4:486 4327 4.177 4 035 3.902 3.776 3.686 12 9.385 8.863 384 7.943 7.536 7.161 6.8146,492 6.1945.918 5.660 5.421 S.197 4988 4.793 4.6114.439 4.278 4.127 3.985 3851 2.725 31 996 9.3948.853 8.358.904 7.487 7.103 6.250 6.424 6.12258425.582 5.3425.11849104.715 4533 4162 4.303 4,0533912 3.780 14 10.363 9.899 9.295 8.745 8.2447.78673676.982 6.628 6.300 6.002 5.7245.468 $ 229 3.00% 4.802 4.611 4.432 4.265 4.103962324 15 11.118 10.380 9.712 9.108 8.559 R.061 7606 7.191 6811 6.462 6.142 5.847 5.575 5324 5.092 4876 4675 4.489 4315 4.153 4001 3.890 16 11652 10.83% 10.106 9.447 8.851 313 7.634 7379 6.9746604 6.265 5.954 5.668 5.405 5.1624918 4.730 4536 4.357 4.189 4013 3.887 17 12.166 11 274 10.477 9.763 9.122 544 3002 7549 7.120 6.729 6173 6.047 5.749 5.475 5.222 4.990 4775 476 4391 4.219 4.099 3910 IX 12.659 11.690 10 808 10.0599372.7568.201 7.702 7.250 6.40 6.467 6.128 5.88 5534 5.2735033 48124.608 4.419 4243 4.080 1928 19 13.14 12.085 11.158 10.116 9.604 8950 $365 7.8397.366 6938 65506198 5.877 5584 5.316 3,070 4843 4.635 4442 426 4.097 3.942 20 13.590 12.462 11470 10.5949.818 9.129 8.5147.963 7.4697.025 6623 6.259 5.9295628 5.3535.101 470 4.657 4460 4.2794.110 3.954 21 14,029 12.821 11.764 10.836 10.017 9.292 8649 8.075 7.562 2.102 6.687 6312 5.9735,665 384 5.123 4891 4.673 4.476 4.292 41203963 22 14.45113.163 12.042 11.061 10 2019.44287728.176 76457,170 6.743 6.399 60115696 5410 5.199 4.90 4.60 4.458 4.362 4.130 3.970 23 14,857 13.489 12.303 01.272 10.371 9.5808.883 8.266 7.718 7210 6792 6.399 6044 5.725 5412 5.167 4.925 4.703 4499 4.311 417 3.976 24 15.247 13.799 12 350 11.469 10.529 9.707 898 8.348 7.784 7.283 6.835. 6,4346.073 5.746 3451 5.1K2 4.97 4.713 4.507 43184.143 3.981 25 15,622 14.094 12.783 11654 10:675 9.8239.077 8.422 7.84373306873 6,4646,097 5.7665.467 5.1954.945 4.721 4.514 4.1234.1473985 26 15.983 14 375 13.003 11.826 10.810 9929 9.161 8.488 2896 7372 6906 6.1916.118 5.783 5.480 5.305 4956 4.728 4520 4.3284151 3.98 27 16.330 14.643 13.211 11.947 10.935 10.027 9237 8.548 7.943 7.409 6935 6.514 6.136 5.798 5.492 5.215 4.964 4.734 4.524 4.333 41543990 28 16.663 14.898 13.406 12.137 11.053 10.116 9.307 8.602 79847.441 6961 6,534 6.152 5810 5.502 5.223 4,970 4.739 4528 4.335 4.157 3.992 29 16.984 15.141 13.591 12.278 11.158 10.198 93708.650 1.0.22 7.470 6983 6.551 6.166 3.20 3510 3.2294.975 4.743 431 4337 4.159 3.994 30 17.292 15.372 13.765 12.409 1.258 10:274 9.427 1.695 2,055 7.497.003 6.566 6.177 5.829 5.517 5.285 4929 4.746 4534 4.319 4.100 3.995 40 19.793 17.159 15.046 13.319 11.925 10.757 9779 95 8.244 7.634 7105 6.642 6.213 5871354 5.258 499 4.760 45444147 4.166 999