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): New Truck $ 52,000 Purchase cost new Remaining book value Overhaul needed now Annual cash operating costs Salvage value now Salvage value eight years from now Present Truck $ 38,000 23,000 9,000 14,000 14,000 2,800 9,000 5,800 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-fuelled, 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 16% discount rate. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. Required: 1-a. Determine the present value of net cash flows using the total cost approach. (Negative amounts should be indicated with a minus sign. Round discount factor(s) to 3 decimal place.) Present Value of Net Cash Flows Purchase the new truck Keep the old truck 1-b. Should Bilboa Freightlines keep the old truck or purchase the new one? O Purchase the new truck O Keep the old truck 2. Using the incremental-cost approach, determine the net present value in favor of (or against) purchasing the new truck? (Negative amounts should be indicated with a minus sign. Round discount factor(s) to 3 decimal place.) Net present value EXHIBIT 10-1 Present Value of $1 F. PE 1 + r)" 4 4 6 9 Period 4% 5% 5 6% 6 8% 10% 12% 14% 16% 18% 20% 22% 24% 26% 28% 30% 40% 1 0.962 0.952 0.943 0.926 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.806 0.794 0.781 0.769 0.714 2 0.925 0907 0.890 0.857 0.826 0.797 0.769 0.743 0.718 0.694 0.672 0.650 0.630 0.610 0.592 0.510 3 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.641 0.609 0.579 0.551 0.524 0.500 0.477 0.455 0.364 0.85 0.823 0.792 0.735 0.683 0.636 0.592 0.552 0.516 0.482 0.451 0.423 0.397 0.373 0.350 0.260 5 5 0.822 0.784 0.747 0.681 0621 0.567 0.519 0.476 0.437 0402 0.370 0.341 0.315 0291 0.269 0.186 0.790 0.746 0.705 0.630 0.564 0.507 0.456 0.410 0.370 0.335 0.303 0.275 0.250 0.227 0.207 0.133 7 0.760 0.711 0.665 0.583 0.513 0.452 0.400 0.354 0.314 0.279 0.249 0.222 0.198 0.178 0.159 0.095 8 8 0.731 0.677 0.627 0.540 0.467 0.404 0.351 0.305 0.266 0.233 0.204 0.179 0157 0.139 0.123 0.068 0.703 0.645 0.592 0.500 0.424 0361 0.308 0.263 0225 0.194 0.167 0.144 0.125 0.108 0.094 0.048 10 0.676 0.614 0.558 0.463 0.356 0.322 0.270 0.227 0.227 0.191 0.162 0.137 0.116 0.099 0.035 0.073 0.035 11 0.650 0.585 0.527 0.429 0.350 0287 0237 0.195 0.162 0.135 0.112 0.094 0079 0.066 0056 0.025 12 0.625 0.557 0.497 0.397 0.319 0.257 0.208 0.168 0.137 0.112 0.092 0.076 0.062 0.052 0.043 0.018 13 0.601 0.530 0.469 0.368 0.290 0.229 0.182 0.145 0.116 0.093 0.075 0.061 0.050 0.00 0.033 0.013 14 0.577 0.505 0.442 0.340 0.263 0.205 0.160 0.125 0.099 0.078 0.062 0.049 0 039 0.032 0.025 0.009 15 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.10 0084 0.065 0.051 0.040 0.031 0.025 0.020 0.006 16 0.534 0.458 0.394 0.292 0.218 0.163 0.123 0.093 0.071 0.054 0.042 0.032 0.025 0.019 0.015 0.005 17 0.513 0.436 0.371 0.270 0.198 0.146 0.108 0.00 0.060 0.045 0.034 0.026 00200015 0.012 0.003 18 0.494 0.416 0.350 0.250 0.180 0.130 0.095 0.069 0.051 0.038 0.028 0.021 0.016 0.012 0.009 0.002 19 0.475 0.396 0.331 0.232 0.164 0.116 0.083 0.060 0.043 0031 0.023 0017 0012 0.009 0.007 0.002 20 0.456 0.377 0.312 0.215 0149 0104 0.0730051 0.037 0.026 0.019 0.014 0.010 0.007 0.005 0.001 21 0.439 0.359 0.294 0.199 0.135 0.093 0.064 0.044 0.031 0.022 0.015 0.011 0.008 0.006 0.004 0.001 22 0.422 0.342 0278 0.184 0.123 0.083 0.056 0.035 0.026 0.018 0.013 0.009 0.006 0.004 0.003 0.001 23 0.406 0.326 0.262 0.170 0.112 0.074 0.049 0.033 0.022 0015 0.010 0.007 0.005 0.003 0.002 24 0.390 0.310 0.247 0.158 0.1020.066 0.043 0.028 0019 0.013 0.008 0.006 0.004 0.003 0.002 25 0.375 0.295 0233 0 146 0.092 0.059 0.035 0.024 0016 0.00 0.007 0.005 0.003 0.002 0.001 26 0.361 0.281 0.220 0.135 0 084 0.053 0.033 0.021 0.014 0.009 0.006 0.004 0.002 0.002 0.001 27 0.347 0.268 0.207 0.125 0.076 0.047 0.029 0018 0.0110.007 0.005 0.003 0.002 0.001 0.001 28 0.333 0.255 0.196 0.116 0.069 0.042 0.026 0.016 0.010 0.006 0.004 0.002 0.002 0.001 0.001 29 0.321 0.243 0.185 0.107 0.063 0.037 0.022 0.014 0.008 0.005 0.003 0.002 0.001 0.001 30 0.305 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0004 0.003 0.002 0.001 0.001 40 0.208 0.142 0.097 0.046 0.022 0.011 0.005 0.003 0.001 0.001 EXHIBIT 10-2 Present Value of an Annuity of $1 1 1 P= (1+r)") + Period 4% 5% 5 6% % 8% 22% 40% 1 0.962 0.952 0.943 0.926 10% 12% 14% 16% 18% 20% 0 909 0.893 0.877 0.862 0.847 0.833 1.736 1 690 1.647 1.605 1.566 1.528 24% 26% 28% 30% 0.820 0.806 0794 0.781 0.769 1.492 1.457 1.424 1.392 1 361 0.714 2 1 886 1.859 1.833 1.783 1.224 3 2.775 2.723 2.673 2.577 2 487 2.402 2.322 2.246 2.174 2.106 2.042 1981 1.923 1.868 1.816 1.589 4 3.630 3.546 3.465 3.312 3.170 3.037 2.914 2.798 2.690 2.589 2.494 2.404 2.320 2.241 2.166 1.879 5 4.452 4.330 4.212 3.993 3.791 3.605 3.433 3.274 3.127 2.991 2.864 2.745 2.635 2.532 2.436 2.035 6 5.242 5.076 4.917 4.623 4.355 4.111 3.889 3.685 3.498 3.326 3.167 2.168 3.020 2.885 2.759 2.643 3.242 3083 2.937 2802 7 6 002 5.786 5.582 5.206 4.868 4 564 4.285 4039 3.812 3.605 3.416 2.263 8 6.733 6.463 6.210 5.747 5.335 4.968 4.639 4.344 4.078 3.837 3.837 3.619 3.421 3.2413.076 2.925 2.331 9 7.435 7.108 6.802 6.247 5.759 5.328 4.946 4.607 4.303 4.031 3.786 3.566 3.366 3.184 3.019 2.379 10 S.111 7.722 7.360 6.710 6.145 5.650 5.216 4.833 4.494 4.192 2.414 3.923 3.662 3.465 3.269 3.092 4.035 3.776 3.544 3.335 3.147 11 8.760 8.306 7.887 7.139 6.495 5.938 5.453 5.029 4.656 4.327 2.438 12 9.385 8.863 S.384 7536 6.814 6.194 5.660 5.197 4.793 4.439 4.127 3.851 3.606 3.387 3.190 2.456 13 9986 9 394 8.853 7.904 7.103 6.424 5.842 5.342 4.910 4.533 4.203 3.912 3.656 3.427 3.223 2.468 14 10.563 9.999 9.295 8.244 7.367 6.628 4.265 3.962 3.695 3.459 3.249 2.477 15 11.118 10.380 9.712 8.559 7.606 6.811 6,002 5.468 5008 4.611 6.142 5.575 5092 5.092 4.675 6.265 5.669 5.162 4.730 4.315 4.001 3.726 3.483 3.483 3.268 2.484 4.357 4.033 3.751 3.503 3.283 2.489 16 11.652 10.838 10.106 8.851 7.824 6.974 17 12.166 11.274 9.122 8.022 7.120 6.373 5.749 5.222 4.775 4.391 4.059 3.771 3.518 3.295 2.492 10.477 10.828 IS 12.659 11.690 9.372 3.201 7.250 4.812 2.494 19 13.134 12.085 11.158 9604 S 365 7.366 4.844 2.496 6.467 5.818 5.273 6.550 5.877 5.316 6.623 5.929 5.353 6.687 5.973 5.384 4.419 4.050 3.786 3.529 3.304 4442 4097 3.799 3.539 3.311 4.460 4.110 3.808 3.546 3.316 4.476 4.121 3.816 3.551 3.320 20 13.590 12.462 11.470 9.818 8.514 7.469 4.870 2.497 21 14.029 12 821 11.764 10.017 8.649 7.562 4.891 2.498 22 14.451 13.163 12.042 10.201 8.772 7.645 6.743 6.011 5.410 4.909 4.488 4.130 3.822 3.556 3.323 4.137 3.827 3.827 3.325 2.498 2.499 23 14.857 13.489 12.303 10.371 8.883 7.718 6.792 5.432 4.925 4.499 24 15.247 13.799 12.550 10.529 8.985 7.784 6.835 6.792 6.044 6.835 6.073 6.873 6.097 5.451 4.937 4.507 4.143 3.831 3.327 2.499 25 15.622 14.094 12.783 10.675 9.077 7.8436.873 5.467 4.948 4.514 4.147 3.834 3.329 2.499 26 15.983 14.375 13 003 10.810 9161 7.896 6.906 6.906 6.118 5.480 4.956 4.520 4.151 3.837 3.330 2.500 27 16.330 14.643 13211 10.935 4.525 4.154 3.839 3.331 2.500 28 16.663 14.898 13.406 11.051 4.528 4.157 3.840 3.331 2.500 6 935 6.136 5.492 4.964 6.961 6.152 5.502 4.970 6.953 6.166 5.510 4.975 7.003 6.177 5.517 4.979 29 16.984 15.141 11.158 9.237 7.943 6.935 9.307 7984 6961 9.370 3.022 6.983 9.427 9.055 7.003 9779 8 244 7 105 4.531 4.159 3.841 13.591 13.765 3.332 2.500 30 17.292 15.373 11.258 4.534 4.160 3.842 3.842 3.332 3.332 2.500 40 19.793 17.159 15.046 11.925 7.105 6.234 5.548 4.997 4.544 4.166 3 846 3.333 3.333 2.500