Answered step by step
Verified Expert Solution
Question
1 Approved Answer
Bilboa Freightlines, S.A. of Panama has a small truck that it uses for local deliveries. The truck is in bad repair and must be either
Bilboa Freightlines, S.A. of Panama has a small truck that it uses for local deliveries. The truck is in bad repair 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): If the company keeps and overhauls its present dellvery Iruck, then the truck will be usable for eight more years, If a new Iruck is purchased, it will be used for eight years, after which it will be traded in on another truck. The new truck would be diesetfuelled. resulting in a substantial reduction in annual operating costs, as shown above. The company computes depreciation on a straight-line basis. All investment projecls are evaluated using a \16 discount rate. Click here to view Exhibil 10-1 and Exhibil 10-2, to determine the appropriate discount faclor(s) using lables. Required: 1-a. Delermine the present value of nel cash flows using the lolatcosl approach. (Negative amounts should be indicated with a minus sign. Round discount factor(s) 103 decimal place.) Buboa Freightlines, S.A. of Panama has a small truck that it uses for local delverles. The truck is in bad repair and must be either overhauled or replaced with a new truck. The compsny has assembied the following information (Panama uses the U.S. dollar as its aurrency) Will be used for eggit years, after which \\( n \\) will be traded in on anoiher truck. The new inuck would be desef-fuedled resulting in a substantial redudion in annual aperating costs, as shown sbove. The company corputes depreaation on a stragm-line besis. All investment projects are evaluated using a 16 : discount rate. Reciulred: 1-a. Determine the present value of net cash flows using the tolatcost approach. (Negative amounts should be indicated with a minus sign. Round discount factor(s) 103 decimal place.) 1-b. Should Bilboa Freightlines keep the old truck or purchase the new one? Purchase the new truck Keep the old Iruck 2. Using the incrementatcost approach, delermine the net present value in favor of (or againsl) purchasing the new truck? (Negative amounts should be indicated with a minus sign. Round discount factor(s) to 3 de enimal place.) 1b. Should Bilbos Freggtlines keep the aid truck ar purchase the new one? Purchase the new truok keep the old truck
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started