Statement

question

Bilboa Freightlines, S.A. of Panama has a small truck that it uses for local dellverles. The truck is in bad repair and must be elther overhauled or replaced with a new truck. The company has assembled the following informatlon (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 elght more years. If a new truck is purchased, It will be used for elght years, after which it will be traded in on another truck. The new truck would be dlesel-fuelled, resulting in a substantial reduction in annual operating costs, as shown above. The company computes depreciation on a stralght-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 approprlate discount factor(s) using tables. Requlred: 1--. Determine the present value of net cash flows using the total-cost approach. (Negatlve amounts should be indlcated with a minus sign. Round dlscount factor(s) to 3 decimal place.) 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 Indlcated with a minus sign. Round dlscount factor(s) to 3 decimal place.)