Question

Check my work 3 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: Present Nev Truck points Truck s 24,000$ 27,000 $ 8,000 $ 7,000 s 11,000 6000 Purchase cost new Remaining book value Overhaul needed now Annual cash operating costa Salvage value-now Salvage value-five years from now eBook $ 2,000 ,000 Prit 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 will be used for five 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. References The company computes depreciation on a straight-line basis. Al investment projects are evaluated using a 18% iscount rate. Click here to view Exhibit 13B-1 and Exhibit 13B-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 3 Required 1Required 2 What is the net present value of the "keep the old truck" alternative? (Enter negative amount with a minus sign final answer to the nearest whole dollar amount.) ninal answer to the nearest whole dollar amount) Net present value

Answer 1

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