Exhibit 10-1

Exhibit 10-2

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): Purchase cost new Remaining book value Overhaul needed now Annual cash operating costs Salvage value now Salvage value eight years from now Present New Truck Truck $ 37,000 $50,500 22,000 8,500 13,000 8,500 13,500 2,680 5,600 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. 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.) 0 Period 4% 5% 6% 8% 10% 14% 16% 20% 22% 24% 26% 28% 30% 40% 1 0.902 0.952 0.943 0.920 0.909 0.893 0.877 0.862 0.847 0.833 0.820 0.800 0.794 0.781 0.789 0.714 2 0.925 0.907 0.890 0.857 0.820 0.797 0.709 0.743 0.718 0.694 0.072 0.050 0.030 0.610 0.592 0.510 3 0.889 0.864 0.840 0.794 0.751 0.712 0.675 0.041 0.009 0.579 0.551 0.524 0.500 0.477 0.455 0.364 0.855 0.823 0.792 0.735 0.083 0.630 0.592 0.552 0.510 0.482 0.451 0.423 0.397 0.373 0.350 0.260 5 0.822 0.784 0.747 0.081 0.021 0.507 0.519 0.470 0.437 0.402 0.370 0.341 0.315 0.291 0.209 0.180 0.790 0.740 0.705 0.030 0.564 0.507 0.450 0.410 0.370 0.335 0.303 0.275 0.250 0.227 0.207 0.133 7 0.700 0.711 0.005 0.583 0.513 0.452 0.400 0.354 0.314 0.279 0.249 0.222 0.198 0.178 0.159 0.095 8 0.731 0.077 0.027 0.540 0.467 0.404 0.351 0.305 0.200 0.233 0.204 0.179 0.157 0.139 0.123 0.068 9 0.703 0.645 0.592 0.500 0.424 0.361 0.303 0.203 0.225 0.194 0.167 0.144 0.125 0.108 0.094 0.048 10 0.070 0.614 0.558 0.403 0.380 0.322 0.270 0.227 0.191 0.102 0.137 0.110 0.099 0.085 0.073 0.033 11 0.050 0.585 0.527 0.429 0.350 0.287 0.237 0.195 0.102 0.135 0.112 0.094 0.079 0.000 0.050 0.025 12 0.025 0.557 0.497 0.397 0.319 0.257 0.203 0.108 0.137 0.112 0.092 0.070 0.002 0.052 0.043 0.018 13 0.001 0.530 0.409 0.308 0.290 0.229 0.182 0.145 0.110 0.093 0.075 0.001 0.050 0.040 0.033 0.013 14 0.577 0.505 0.442 0.340 0.203 0.205 0.100 0.125 0.099 0.078 0.002 0.049 0.039 0.032 0.025 0.009 15 0.555 0.481 0.417 0.315 0.239 0.183 0.140 0.108 0.084 0.005 0.051 0.040 0.031 0.025 0.020 0.000 10 0.534 0.458 0.394 0.292 0.218 0.103 0.123 0.093 0.071 0.054 0.042 0.032 0.025 0.019 0.015 0.005 17 0.513 0.371 0.270 0.198 0.146 0.108 0.080 0.000 0.034 0.020 0.020 0.015 0.012 0.003 18 0.494 0.410 0.350 0.250 0.180 0.130 0.095 0.009 0.051 0.038 0.028 0.021 0.010 0.012 0.009 0.002 19 0.475 0.390 0.331 0.232 0.104 0.110 0.083 0.000 0.043 0.031 0.023 0.017 0.012 0.009 0.007 0.002 20 0.450 0.377 0.312 0.215 0.149 0.104 0.073 0.051 0.037 0.020 0.019 0.014 0.010 0.007 0.003 0.001 21 0.439 0.359 0.294 0.199 0.135 0.093 0.004 0.031 0.022 0.015 0.011 0.008 0.000 0.004 0.001 22 0.422 0.342 0.278 0.134 0.123 0.083 0.050 0.038 0.020 0.018 0.013 0.009 0.000 0.004 0.003 0.001 23 0.400 0.320 0.202 0.170 0.112 0.074 0.049 0.033 0.022 0.015 0.010 0.007 0.005 0.003 0.002 24 0.390 0.310 0.247 0.158 0.102 0.006 0.043 0.028 0.019 0.013 0.008 0.000 0.004 0.003 0.002 0.375 0.295 0.233 0.140 0.092 0.059 0.033 0.024 0.010 0.010 0.007 0.005 0.003 0.002 0.001 26 0.361 0.281 0.220 0.135 0.084 0.053 0.033 0.021 0.014 0.009 0.000 0.004 0.002 0.002 0.001 27 0.347 0.208 0.207 0.125 0.070 0.047 0.029 0.018 0.011 0.007 0.005 0.003 0.002 0.001 0.001 28 0.333 0.255 0.190 0.110 0.009 0.042 0.020 0.010 0.010 0.000 0.004 0.002 0.002 0.001 0.001 29 0.321 0.243 0.185 0.107 0.003 0.037 0.022 0.014 0.008 0.005 0.003 0.002 0.001 0.001 30 0.308 0.231 0.174 0.099 0.057 0.033 0.020 0.012 0.007 0.004 0.003 0.002 0.001 0.001 40 0.208 0.142 0.097 0.040 0.022 0.011 0.005 0.003 0.001 0.001 Period 9 1 : 0.43 1. 0.90g 393 0.87 862 0.8%) 333 2.820 0.806 1794 31 55 14 2 1. 1. 1. 1. 1.36 1.690 1.=? 1.05 1.566 1.528 192 157 1-24 1392 1.38] 1.224 3 2.373 2.72 2. ! 2. 2.87.02 2.322 2.26 2.174 2.106 2.02 1.98] 1923 1. 3. 3.4 3. 3. 3.170 3.037 1914 2.79% 2.80 2589 2. 94 2. D4 2.20 2.26] 2.1 .212 3.3 3.79] 3.80% +33 3274 3127 2.99] 2.864 2.7% 2.83% 2532 2 35 2.03% 5. 4.355 4.11] 3.889 2.685 3698 326 3.137 3.020 2.885 3759 2.5=2.168 . 2. 5.222 3.2 4.868 4.564 4.288 4.039 3812 3.605 3618 3.2% 3.08 2937 2.802 2263 8 5.43 5.210 5.: 4.968 4.35 4.364 4.078 3.837 3.1 3.2%) 3.07 1923 2.33] 9 7.435 5. 247 2.59 1325 4.94% 4.80 4303 4.03] 3.783 33B 3.184 3019 2379 1 . 14 2.650 2.216 4.83 4.494 4.192 2.923 3.662 2.465 3.255 2.092 2.5 14 11 8. B. 3 7. 9% 2.935 453 2.029 4.85 4.327 4.03% 3.76 3.54 33% 3.13438 12 9.323 8.a 8.334 814 199 80 2.19747934 35 4.127 3.85] 3.806 33873190 13 93 8.33 1.3.74 7.103 24 2.82 362 4.910 4.532 4.205 3.912 3.656 2627 22:26BE 14 99 9.23 3.24 7.367.628 ..002 2.8 3.00 4.51] 4.265 3962 3.695 355 3.25 27 ] 11.1] 0.3 8.5 7.606 .311 .. 1 2 3.575 2.092 4.5 4.215 4.001 3726 33 3.258 284 11.6 , 10 3.31 7.224 974 255 2.665 2.162 4.7 30 4.357 4.033 3.75] 3.50 2.282 2.489 17 12.1 ce 1.27 2.022 7.120 .372 2745 2222 4.775 4.39] 4.059 3.77] 2.5 18 3.29% 2.492 13 11 .822 9. 2.20] 7.250 57 2.818 2.275 4.812 4.5 15 4.080 3.786 2.525 3.204 2.494 13 13.1 111 3. 4 7.36G 550 3.337 3.316 4.84 4.: 4.097 3799 3539 3311 2.696 13 11 9.19 3.5 14 7 BS .B23 929 35:4.80 460 4.110 3.80s 3.5% 3316 2697 12.82 11 10.017 2.569 7.562 .587 2975384 4.89] 4.75 4.12] 2.816 3.55] 320 2.698 22 12.1 2.242 C. D 3.772 7.5 :01] 10 4.90 4.48 4.130 3.322 39 :32:298 .. 3. 2. 303 10.37] 1.718 792 .04 32 4.923 4. 99 4.137 2.827 332 24 3.7% 12.52 2.985 7.784 2.835 07:25] 4.937 4.50] 4.13 3.83] 352 3327 2.99 2 13. 1,054 2.72 2.077 7.362 .333..097 57 4.98 4.514 4.167 3834 3564 3.325 2.99 .. 3.003 3] 191 1.89 906 118 80 4.95 4.520 4.15] 3.837 3.5 3.330 2. Do 27 2 4 13.2] c.92 5.237 7.96..935..136 392 4.94 4.32 4.134 3.39 567 3.33] 2.5DD .. 3. 11.05 5.307 7.984 951 .152 2.502 4.970 4.528 4.157 3.840 2.568 3.33] 5 .. 1924 1.14 12.99 11.122 2.370 3.022 982.166 2510 4.95 4.53] 4.155 3.86] 3.565 3.332 3.500 13.373 3. 11 27 2.055 7.003.177 2.517 4. 4.534 4.160 3.82 3.565 3.332 2.500 1. 12= 13.0 11.92 5.79 2.24 7.105.234 2.548 4.997 4.244 4.166 2.34 2.97] 33 3.00 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 1-b. Should Bilboa Freightlines keep the old truck or purchase the new one? Purchase the new truck Keep the old truck 2. Using the incremental-cost approach, determine the net present value in favor of (or against) purchasing the new truck? (Negative amounts should be indicated with a minus sign. Round discount factor(s) to 3 decimal place.) Net present value