ss Click here to view Exhibit 14B-1 and Exhibit 14B-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 1. Required 2 Required 3What is the pet present value of the "keep the old truck" alternative? (Enter negative amount with a minus sign. Round yourfinal answer to the nearest whole dollar amount.)Net present valueRequired 1Required 2 > Problem 14-28 (Algo) Net Present Value Analysis [LO14-2]Bilboa Freightlines, S.A, of Panama, has a small truck that it uses for intracity deliveries. The truck is worn out and must be eitheroverhauled or replaced with a new truck. The company has assembled the following information:Purchase cost newRemaining book valueOverhaul needed nowAnnual cash operating costsSalvage value-nowSalvage value-five years from nowPresentTruck$36,000$ 23,000$ 22,000$ 17,500$ 12,000$ 15,000New Truck$ 48,000$ 16,000$6,000If the company keeps and overhauls its present delivery truck, then the truck will be usable for five more years. If a new truck ispurchased, 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.The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 9% discount rate.Click here to view Exhibit 14B-1 and Exhibit 148-2. to determine the appropriate discount factor(s) using tables.

Capital budgeting tools are used by investors to determine the investment's feasibility in terms of…

Answered: Bilboa Freightlines, S.A., of Panama,…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 6PB

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Net Present Value Analysis 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: 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. The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 16% discount rate. Required: 1. What is the net present value of the “keep the old truck” alternative? Round to the nearest whole dollar. 2. What is the net present value of the “purchase the new truck” alternative? Round to the nearest whole dollar. 3. Should Bilboa Freightlines keep the…
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