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:

	Present Truck			New Truck
Purchase cost new	$	29,000		$	37,000
Remaining book value	$	16,000			-
Overhaul needed now	$	15,000			-
Annual cash operating costs	$	15,000		$	12,500
Salvage value-now	$	8,000			-
Salvage value-five years from now	$	7,000		$	11,000

If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. If a new truck is purchased, it will be used for five 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.

The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 13% discount rate.

Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables.

Required:

1. What is the net present value of the keep the old truck alternative?

2. What is the net present value of the purchase the new truck alternative?

3. Should Bilboa Freightlines keep the old truck or purchase the new one?

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: Present Truck New Truck 29, 000 16,000 15,000 15,000 9,000 7,000 37,000 Remaining book value Overhaul needed now Annual Salvage value-now Salvage value-five yeara fron now cash operating costs 12,500 11,000 If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. lf a new truck is purchased, it will be used for five years, after which it will be traded in on another truck new truck would be diesel-operated, 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 13% discount rate Click here to view Exhibit 13B-1 and Exhibit 13B-2, to determine the appropriate discount factor(s) using tables. Required: 1. What is the net present value of the "keep the old truck" alternative? 2. What is the net present value of the "purchase the new truck" alternative? 3. Should Bilboa Freightlines keep the old truck or purchase the new one? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the net present value of the "keep the old truck alteative? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.)