Bilboa Freightlines, S.A., of Panama, uses a truck for intracity deliveries that has worn out and must be overhauled or replaced. The company assembled the following information: Present Truck New Truck Purchase cost (new) $ 36,000 $ 48,000 Remaining book value $ 23,000 - Overhaul needed now $ 22,000 - Annual cash operating costs $ 17,500 $ 16,000 Salvage value-now $ 12,000 - Salvage value-five years from now $ 15,000 $ 6,000 If the company overhauls its present delivery truck, then it will be usable for five more years. If a new truck is purchased, it will be used for five years and then traded in for another truck. The new truck would be diesel-operated, resulting in lower annual operating costs, as shown above. The company computes depreciation on a straight-line basis and uses a 9% discount rate.

Click here to view Exhibit 14B-1 and Exhibit 14B-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, uses a truck for intracity deliveries that has worn out and must be overhauled or replaced. The company assembled the following information: If the company overhauls its present delivery truck, then it will be usable for five more years. If a new truck is purchased, it will be usec for five years and then traded in for another truck. The new truck would be diesel-operated, resulting in lower annual operating costs, as shown above. The company computes depreciation on a straight-line basis and uses a 9% discount rate. Click here to view Exhibit 14B-1 and 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. What is the net present value of the "keep the old truck" alternative? Note: Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount. What is the net present value of the "purchase the new truck" alternative? Note: Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount