Chapter 13 Question 4

Chapter 13 Homework problems Saved Help Save & Exit Submit Check my work 4 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: 10 points Present New Truck Truck Purchase cost new $29 , 000 $37,000 Remaining book value $16 ,000 eBook Overhaul needed now $15 , 000 Annual cash operating costs $15 ,000 $12,500 salvage value-now $ 8, 000 Print salvage value-five years from now $ 7, 000 $11,000 Reference 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 wil be used for five years, after which it wil 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 138-1 and Exhibit 138-2, 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" alternative? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value Required 1 Required 2 2Required 3 What is the net present value of the "purchase the new truck" alternative? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value Required 1 Required 2 Required 3 Should Bilboa Freightlines keep the old truck or purchase the new one? OPurchase the new truck OKeep the old truck