Chapter 13 Homework6 Saved Help Save & Ex Che Problem 13-28 Net Present Value Analysis [LO13-2] 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: points Present Truck New Truck Purchase cost new Remaining book value Overhaul needed now Annual cash operating costs Salvage value-now Salvage value-five years from now $31,000 36,000 $ 24,000 23,000 eBook $ 22,000 19,500 $ 5,000 $ 20,000 12,000 Print 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 References The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 7% 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 Required1Required 2 Required 3 EXHIBIT 13B-1 Present Value of $1; + r Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14 1 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 o. 2 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0.812 0.797 0.783 O. 3 0.889 0.864 0.840 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0. 4 0.855 0.823 0.792 0.763 0.735 0.708 0.683 0.659 0.636 0.613 O. 5 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0. 6 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0 7 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0 8 0.731 0.677 0.627 0.582 0.540 O.502 0.467 0.434 0.404 0.376 0. 9 0.703 0.645 0.592 0.544 0.500 0.460 0.424 0.391 0.361 O.333 O. 10 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0.352 0.322 0.295 0. 11 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 0 12 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0 13 0.601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 O. 14 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 O
