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3rd try posting this. both submissions received were wrong so far Bilboa Freightlines, S.A., of Panama, has a small truck that It uses for Intracity
3rd try posting this. both submissions received were wrong so far
Bilboa Freightlines, S.A., of Panama, has a small truck that It uses for Intracity deliveries. The truck is worn out and must be elther overhauled or replaced with a new truck. The company has assembled the following Information: Purchase cost Renaining book value Overhaul needed now Annual cash operating costs Salvage value-now Salvage value-five years from now Present Truck Truck $ 28,000 $ 38,000 $ 15,000 $ 14,000 $ 14,500 $ 13,000 $ 10,000 $9, eee $ 12,000 ence 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 13% discount rate, Click here to view Exhibit 138-1 and Exhibit 138-2. to determine the appropriate discount factors) 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 Required 2 Reafired Should Biboa Freightlines keep the old truck or purchase the new one? Purchase the new truck Keep the old truck (Required 2 Step by Step Solution
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