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Answer pls. Thank you Alternate problem B Fed Extra Company is considering replacing 10 of its delivery vans that originally cost USD 30,000 each; depreciation
Answer pls. Thank you
Alternate problem B Fed Extra Company is considering replacing 10 of its delivery vans that originally cost USD 30,000 each; depreciation of USD 18,750 has already been taken on each van. The vans were originally estimated to have useful lives of eight years and no salvage value. Each van travels an average of 150,000 miles per year. The 10 new vans, if purchased, will cost USD 36,000 each. Each van will be driven 150,000 miles per year and will have no salvage value at the end of its three-year estimated useful life. A trade-in allowance of USD 3,000 is available for each of the old vans. Following is a comparison of costs of operation per mile: Old vans New vans Fuel, lubricants, etc. $ 0.152 $ 0.119 Tires 0.067 0.067 Repairs Depreciation Other operating costs Operating costs per mile $ 0.405 $ 0.396 Use the payback period method for (a) and (b). a. Do you recommend replacing the old vans? Support your answer with computations and disregard all factors not related to the preceding data. b. If the old vans were already fully depreciated, would your answer be different? Why? C. Assume that all cost flows for operating costs fall at the end of each year and that 18 per cent is an appropriate rate for discounting purposes. Using the net present value method, present a schedule showing whether or not the new vans should be acquired. 0.110 0.025 0.051 0.087 0.080 0.043 Alternate problem B Fed Extra Company is considering replacing 10 of its delivery vans that originally cost USD 30,000 each; depreciation of USD 18,750 has already been taken on each van. The vans were originally estimated to have useful lives of eight years and no salvage value. Each van travels an average of 150,000 miles per year. The 10 new vans, if purchased, will cost USD 36,000 each. Each van will be driven 150,000 miles per year and will have no salvage value at the end of its three-year estimated useful life. A trade-in allowance of USD 3,000 is available for each of the old vans. Following is a comparison of costs of operation per mile: Old vans New vans Fuel, lubricants, etc. $ 0.152 $ 0.119 Tires 0.067 0.067 Repairs Depreciation Other operating costs Operating costs per mile $ 0.405 $ 0.396 Use the payback period method for (a) and (b). a. Do you recommend replacing the old vans? Support your answer with computations and disregard all factors not related to the preceding data. b. If the old vans were already fully depreciated, would your answer be different? Why? C. Assume that all cost flows for operating costs fall at the end of each year and that 18 per cent is an appropriate rate for discounting purposes. Using the net present value method, present a schedule showing whether or not the new vans should be acquired. 0.110 0.025 0.051 0.087 0.080 0.043 Step by Step Solution
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