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 $ 68,500 Purchase cost new Remaining book value Overhaul needed now Annual cash operating costs Salvage value now Salvage value eight years from now Present Truck $ 49,000 34,000 14,500 20,500 19,500 5,000 14,500 8,000 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-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. EXHIBIT 10-1 Present Value of $1 F. P (1 + r) Period 20 23 1 2 3 4 5 3 8% 10% 125 16% 20% 26% 28% 30% 100% 0.962 0 952 0943 0926 0909 0.893 0877 0362 0.547 0833 0.80 0.86 0.794 0.781 0.769 0714 0.925 0.907 0.590 0.857 0.826 0.797 0.769 0.743 0.715 0.694 0.672 0.650 0.630 0.610 0.592 0.510 08990364 0940 0794 0751 07120675 0.641 0609 05700551 0.524 0.500 0477 0455 0164 0.855 0.923 0.792 0.735 0.663 0.636 0.592 0.552 0.516 0.482 0.451 0.423 0.397 0.373 0.350 0.260 08 078 747 0681 0621 567 0519 0476 0437 1402 03700341 0313 091 D 186 0.790 0.746 0.705 0.630 0.561 0.507 0.4560.410 0.370 0.335 0.303 0.275 0.250 0.227 0.207 0.133 0760 0711 D66 053 0513 045 0400015 0314 0 270 00 195017 0 1959 D 0.73 0.677 0.627 0.500 0.167 0.001 0.351 0.305 0.266 0.233 0.20 0.179 0.157 0.139 0.123 0.068 0645 DSKI 0414 361 D308 075 0775 D) 1994 (167 01:44 015 01 004 1043 0.676 0.61 0.556 0.163 0.356 0.322 0.270 0.227 0.191 0.162 0.137 0.116 0.099 0.065 0.073 0.005 076 6 7 0 10 11 12 1 11 1 16 IS 19 20 21 000 OS 04 0787 195 0167 D ( 112 194 19 DING 016 DO 0.625 0.587 0.197 0.397 0.319 0.257 0.206 0.165 0.137 0.112 0.092 0.076 0.062 0.032 0.013 0.016 OS ON 1) DO 145 ( 116 ) AXA 105 D1600 DINO DIA 0.377 0.505 0.412 0.310 0.263 0.205 0.160 0.125 0.099 0.076 0.002 0.019 0,039 0.002 0.025 0.009 0330 041 141 0315 120 018: 0 14001 0a4 D D DINO (11 Da OGNI D D 0.534 0.156 0.391 0.292 0.216 0.163 0.123 0.093 0.071 0.051 0.012 0.002 0.025 0.019 0.013 0.003 0313 0436 OZI 0 1981 D10 COD045 01034 DOING D DIS 0012004 0.491 0.416 0.350 0.250 0.150 0.130 0.095 0.069 0.051 0.038 0.025 0.021 0.016 0.012 0.009 0.002 0475 0.296 0331 0232 0164 0.116 0088200043 001 0023 DDI 0012 D D OCH D00 0.456 0.377 0.312 0.213 0.19 0.104 0.073 0.051 0037 D026 0019 O 014 0010 D D OKS 0001 04:9 0.359 0294 01990135 0093 0044 0.031 0.022 0.015 0.01 0.005 0.006 0.004 0.001 0.422 0.342 0.275 0.184 0.123 0.063 0.056 0.0080026 DDIS 0013 D009000 0004 000 0001 06 0326 022 017001120074 0049 0043 0.022 0.0150010 0.007 0.005 0.003 0.002 0.390 0.310 0.247 0.158 0.1020.066 0.043 0.025 0019 0013 GOS 0 006 000 000 00012 0.375 0295 0233 0146 0092 09 0038 0004 0.016 0.000 0.007 0.005 0.003 0.002 0.001 0.361 0281 0.220 0.135 0.054 0.053 0.033 0.021 0014 000 000 000 0002 0 002 0001 0.347 0268 070125 0076 0047 0029 001S0011 0.007 0.005 0.003 0.002 0.001 0.001 0.333 0255 0.196 0.116 0.069 0.042 0.026 0.016 0010 0.006 0004 0.002 0.002 00010001 0.321 0 240 0185 0.1070.063 0.007 0.022 0.014 0.005 0.005 0.003 0.002 0.001 0.001 0.305 0.231 0.174 0.099 0.057 0.003 0.020 0.012 0.007 0.004 0.003 0.002 0.001 0.001 0.205 0.142 0.097 0.046 0.022 0.01 0.005 0.002 0.001 0.001 22 23 24 25 26 27 25 29 30 40 EXHIBIT 10-2 Present Value of an Annuity of $1 +-)" 4% SS Period 1 0.962 0.952 0.943 0.926 2 1.886 1959 1.833 1.783 3 2.775 2.723 2673 2.577 4 3630 3.546 3.366 3.312 5 4452 4330 4212 3.993 5.242 5076 4.917 7 6.000 3.756 6.163 3.382 6210 5.206 5.747 6.730 9 7.435 7.105 6.302 7.300 10 8.111 7.722 6.710 11 8.760 8.306 7.537 7.139 9.335 8.354 7.536 13 9936 9394 8853 7.904 10 124 165 185 20% 22 245 26% 28% 30 40 0909 0.893 0.877 0.5620547 0.833 0.520 0506 0.794 0.751 0759 0.714 1.736 1.090 1.647 605 1.566 1.528 1.457 1.424 1.392 1.361 1.224 2487 2402 2.322 2.246 2.174 2.106 2.042 1981 1.923 1.868 1516 1.589 3.1703037 2.914 2.798 2090 2.589 2494 2.404 2.320 2.241 2.166 1879 3.791 3605 3.433 3.274 3.127 2.991 2.564 2.745 2635 2.532 2.436 2.035 4.355 4.111 3.899 3.685 3.498 3.326 3.167 3.020 2.955 2.759 2.643 2.168 4.368 4564 4.255 4.039 3.512 3.600 3.416 3.2423.083 2.937 2.302 2.263 5.335 4968 4.639 4344 4078 3.937 3.619 3.421 3.241 3.076 2925 2331 5.759 5328 4946 4607 4.3034031 3.756 35663.366 3.154 3019 2379 6.145 5650 5.216 4833 4.494 4.1923.923 3.662 3.465 3.269 3.092 2.414 6.493 3.938 5.453 5.029 4.656 4.327 4.0353.776 3.544 3.335 3.147 2438 6.314 6.194 5.660 5.197 4.793 44394.127 3851 3.606 3.387 3.190 2.456 7100 6424 5342 5.3424910 4533 4203 39123656 3.427 3.223 2.468 7.367 6628 6.002 5.468 5008 4.611 4.265 3.962 3.695 3.459 329 2.477 7.606 6.511 6.142 3.575 5.092 4.675 4.315 4.001 3.726 3.483 3.268 2.484 7.824 6.974 6.265 5.609 5162 4.730 4357 4033 3.751 3.500 3.283 2.489 80227.120 6.373 5.749 5222 4775 4.391 4059 3.771 3.518 3.295 2.492 3.201 7250 6.467 5 SIS 5 273 4.812 4.4194060 3.756 3.529 3.304 2.494 S365 7.306 6.550 5.877 5.316 4.844 4.442 4.097 3.799 3.339 3.311 2.496 8.514 7460 6.623 5.9295353 4.870 4460 4.110 3.908 3.5463.316 2.497 S69 7.562 6657 3.9735354 4891 4.476 41213.816 3.551 3.320 2.498 8.772 7645 6.743 60115.410 4.909 4456 4.130 3.822 3.556 3323 2.490 SSSS 7.7180.792 6.792 6.044 5.432 4.925 4.499 4.137 3.27 3.325 2.499 8.955 7.784 6,835 6.835 6.073 5.451 4.937 4.507 4.143 3.831 3.327 2.499 9.077 78436.873 6.573 6097 5.467 49484514 4147 3.8943329 2.490 9161 7.896 6.906 6.906 6.118 5.490 4956 4520 4.151 3.837 3.330 2.500 9237 7.9436.935 6.935 136 5.492 4.964 525 4.154 3.3393331 2.500 14 10.563 9999 9.295 9.244 15 9.712 10.350 10.338 5.559 8.851 16 11 652 10 106 17 9.122 12.166 12659 11.274 11.600 10-477 10.525 18 9.372 19 13.134 12.045 11.158 9.004 20 13.500 11:470 9.818 10017 21 14029 11.764 13.163 12.042 10.200 22 23 14.451 14.857 13.489 12.303 10.371 24 15.247 13.799 12.550 12.733 10.329 10675 25 15.622 14094 26 15.933 14 375 10.810 13.003 13211 27 16.330 14.643 10.935 28 16.663 14898 11.05 9.307 7934 6961 13.406 13.591 6.152 5.502 4.970 4.528 4.157 3.500 3.331 2.500 6.953 6.166 5.510 49754531 4.1593.41 3.332 2.500 % 16956 15.141 11.158 9370 5.022 6.983 30 15 373 13.765 11.238 9.427 3.055 7003 2.500 17.292 19.793 7.003 6.177 5.517 4.979 4534 4.160 3.842 3.332 7.105 6234 5.545 4.997 + 544 4.166 3.846 3.300 40 17.159 15.046 11.925 9.779 S. 244 7.105 2.500 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