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I need help with this homework question. Bilboa Freightlines, S.A., of Panama, has a small truck that it users for intracity deliveries. The truck is
I need help with this homework question.
Bilboa Freightlines, S.A., of Panama, has a small truck that it users 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 (Panama uses the U.S. dollar as its currency): 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-operated, resulting in a substantial reduction in annual operating costs, as shown above. The company depreciation on a straight-line bases. All investment projects are evaluated using a 16% discount rate. (Ignore income taxes.) To determine the appropriate discount factor(s) using tables, click here to view Exhibit 12B-1 and Exhibit 12B-2. Alternatively, if you calculate the discount factor(s) using a formula, round to three (3) decimal places before using the factor in the problem. Determine the net present value using the total-cost approach. (Negative amounts should be indicated by a minus sign. Round your answers to the nearest dollar amount. Omit the "$" sign in your response.) Purchase new truck Overhaul and keep old truck Should Bilboa Freightlines keep the old truck or purchase the one? Using the incremental approach. determine the net present value in favor (or against) purchasing the new truck? (Negative amount should be indicated by a minus sign. Round your answer to the nearest dollar amount. Omit the "$" sign in your response.)
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