NEED ANS ASAP

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):

Present Truck New Truck Purchase cost new $ 41,000 $ 56,500 Remaining book value 26,000 - Overhaul needed now 10,500 - Annual cash operating costs 12,500 10,500 Salvage value now 15,500 - Salvage value eight years from now 3,400 6,400

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.)

1-b. Should Bilboa Freightlines keep the old truck or purchase the new one?

multiple choice 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.)