The document compares the costs of overhauling an old truck versus purchasing a new truck for Bilboa Freightlines. It calculates the net present value of overhauling the old truck at $7,000 and the annual costs over 5 years, finding the NPV is $1,112 in favor of overhauling. It also calculates the NPV of purchasing a new truck at $30,000 and the annual costs over 5 years, finding the incremental cost approach favors overhauling the old truck by $13,095 based on the investment required and additional annual and salvage value costs.
The document compares the costs of overhauling an old truck versus purchasing a new truck for Bilboa Freightlines. It calculates the net present value of overhauling the old truck at $7,000 and the annual costs over 5 years, finding the NPV is $1,112 in favor of overhauling. It also calculates the NPV of purchasing a new truck at $30,000 and the annual costs over 5 years, finding the incremental cost approach favors overhauling the old truck by $13,095 based on the investment required and additional annual and salvage value costs.
The document compares the costs of overhauling an old truck versus purchasing a new truck for Bilboa Freightlines. It calculates the net present value of overhauling the old truck at $7,000 and the annual costs over 5 years, finding the NPV is $1,112 in favor of overhauling. It also calculates the NPV of purchasing a new truck at $30,000 and the annual costs over 5 years, finding the incremental cost approach favors overhauling the old truck by $13,095 based on the investment required and additional annual and salvage value costs.
The document compares the costs of overhauling an old truck versus purchasing a new truck for Bilboa Freightlines. It calculates the net present value of overhauling the old truck at $7,000 and the annual costs over 5 years, finding the NPV is $1,112 in favor of overhauling. It also calculates the NPV of purchasing a new truck at $30,000 and the annual costs over 5 years, finding the incremental cost approach favors overhauling the old truck by $13,095 based on the investment required and additional annual and salvage value costs.
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Bilboa Freightlines required rate of return present truck new truck purchase cost (new) $21,000 $30,000 remaining book value $11,500 overhaul needed now $7,000 annual cash operating costs $10,000 $6,500 salvage value-now $9,000 salvage value-five years from now $1,000 $4,000 discount rate 16% NPV $1,112 in favor of overhauling the old truck
Bilboa Freiightlines, S.A
Total Cost Approach Net present value claculation Item Year (s) Ammount of cash flows Overhaul old truck: 0 $7,000 Overhaul now 0 $7,000 Annual cash oprating costs 5 $10,000 Salvage vale in five years 5 $1,000 Net present value
Purchase new truck:
Purchase cost new 5 $30,000 Salvage value of old truck now 0 $1,000 Annual cash operating costs 5 $6,500 Salvage vaue of new truck in five years 5 $4,000 Net Present Value
Logic 'IF' statents
Bilboa Freiightlines, S.A
Increamental Cost Approach Net present value claculation Item Year (s) Ammount of cash flows Increamental investment- in favour of old truch 0 $9,000 additional annual cash operating cost 5 $3,500 lost salvage value in five years 5 $3,000 lost savage value for old truck now 0 $1,000 Net Present Value
name and ZID#
Logic 'IF' statents
name and ZID#
Year/Periods 5 0 0 5 0 5
s, S.A
on PV $7,000.00 $7,000.00 $4,761.13 $476.11 $19,237
$14,283.39 $1,000.00 $3,094.73 $1,904.45 $20,283
NPV in favor of overhauling the old truck
s, S.A ch on PV $9,000.00 $1,666.40 $1,428.34 $1,000.00 $13,095
