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Bilboa Freightlines. S. A. . of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be
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 (Panama uses the U. S. dollar as its currency): Present Truck New Truck Purchase cost new $21,000 $30,000 Remaining book value $11,500 Overhaul needed now $7,000 Annual cash operating costs $10,000 $6,500 Salvage value-now $9,000 Salvage value-eight years from now $1,000 $4,000 If the company keeps and overhauls its present delivery truck, then the truck will be usable for eight more years. If a new truck is purchased, it will be used for eight 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. 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 (Panama uses the U. S. dollar as its currency): Present Truck New Truck Purchase cost new $21,000 $30,000 Remaining book value $11,500 Overhaul needed now $7,000 Annual cash operating costs $10,000 $6,500 Salvage value-now $9,000 Salvage value-eight years from now $1,000 $4,000 If the company keeps and overhauls its present delivery truck, then the truck will be usable for eight more years. If a new truck is purchased, it will be used for eight 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
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