Question
In: Accounting
Pompeii's Pizza has a delivery car that it uses for pizza deliveries. The transmission needs to...
Pompeii's Pizza has a delivery car that it uses for pizza deliveries. The transmission needs to be replaced and there are several other repairs that need to be done. The car is nearing the end of its life, so the options are to either overhaul the car or replace it with a new car. Pompeii's has put together the following budgetary items:
| Present Car | New Car | |
| Purchase cost new | $32,000 | |
| Transmission and other repairs | $8,500 | |
| Annual cash operating cost | 12,500 | 10,000 |
| Fair market value now | 6,000 | |
| Fair market value in five years | 500 | 6,000 |
If Pompeii’s replaces the transmission of the pizza delivery vehicle, they expect to be able to use the vehicle for another 5 years. If they sell the old vehicle and purchase a new vehicle, they will use that vehicle for 5 years and then trade it in for another new pizza delivery vehicle. If they trade for the new delivery vehicle, their operating expenses will decrease because the new vehicle is more gas efficient and the maintenance on a new car is less. This project is analyzed using a discount rate of 10%.
(Click here to see present value and future value tables)
A. Calculate the NPV on both Cars. Round your present value factor to three decimal places and the rest to nearest dollar.
| Present Car | $ |
| New Car | $ |
Solutions
Expert Solution
NPV of related
costs
Present Car : $55,565
New Car : $60,174
ekkarill92 answered 1 year agoRelated Solutions
Pompeii's Pizza has a delivery car that it uses for pizza deliveries. The transmission needs to...
Pompeii's Pizza has a
delivery car that it uses for pizza deliveries. The transmission
needs to be replaced and there are several other repairs that need
to be done. The car is nearing the end of its life, so the options
are to either overhaul the car or replace it with a new car.
Pompeii's has put together the following budgetary items:
Present Car
New Car
Purchase cost new
$30,000
Transmission and other repairs
$8,500
Annual cash operating cost...
A manager of a pizza restaurant has changed the restaurant's delivery process in an effort to...
A manager of a pizza restaurant has changed the restaurant's
delivery process in an effort to reduce the mean time between the
order and completion of delivery from the current 25 minutes. A
sample of 36 orders using the new delivery process yields a sample
mean of 22.1 minutes and a sample standard deviation of 5 minutes.
Complete parts (a) through (d) below.
a. Using the critical value approach, at the 0.05 level of
significance, is there evidence that the...
A manager of a pizza restaurant has changed the restaurant's delivery process in an effort to...
A manager of a pizza restaurant has changed the restaurant's
delivery process in an effort to reduce the mean time between the
order and completion of delivery from the current 30 minutes. A
sample of 49 orders using the new delivery process yields a sample
mean of 27.7 minutes and a sample standard deviation of 6
minutes.
a.) Using the critical value approach, at the 0.05 level of
significance, is there evidence that the population mean delivery
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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
Truck
New
Truck
Purchase cost new
$
38,000
$
48,000
Remaining book value
$
28,000
-
Overhaul needed now
$
27,000
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Annual cash operating costs
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20,000
$
18,500
Salvage value-now
$
10,000
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Salvage value-five years from
now
$...
Maxilift Australia has a small truck that it uses for intracity deliveries. The truck is worn...
Maxilift Australia has a small truck that it uses for intracity
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replaced with a new truck. The company has assembled the following
information. Present Truck ($) 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 eight years from now 1,000 4,000 Additional
Information • If the company keeps and...
Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The...
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 Truck New Truck
Purchase cost (new) $ 28,000 $ 38,000 Remaining book value $ 15,000
Overhaul needed now $ 14,000 Annual cash operating costs $ 14,500 $
13,000 Salvage value-now $ 10,000 Salvage value-five years from now
$ 9,000 $ 12,000...
Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The...
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
Truck
New
Truck
Purchase cost new
$
35,000
$
50,000
Remaining book value
$
25,000
-
Overhaul needed now
$
24,000
-
Annual cash operating costs
$
18,500
$
18,000
Salvage value-now
$
15,000
-
Salvage value-five years from now
$...
Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The...
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
Truck
New
Truck
Purchase cost (new)
$
36,000
$
48,000
Remaining book value
$
23,000
Overhaul needed now
$
22,000
Annual cash operating costs
$
17,500
$
16,000
Salvage value-now
$
12,000
Salvage value-five years from now
$
15,000
$
6,000...
Bilboa Freightlines, S.A., of Panama, has a small truck that it uses for intracity deliveries. The...
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
Truck
New
Truck
Purchase cost (new)
$
25,000
$
30,000
Remaining book value
$
11,000
Overhaul needed now
$
11,000
Annual cash operating costs
$
12,500
$
10,000
Salvage value-now
$
5,000
Salvage value-five years from now
$
4,000
$
5,000...
Bilboa Freightlines, S.A. of Panama has a small truck that it uses for local deliveries. The...
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
$
55,000
Remaining book value
26,000
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Overhaul needed now
8,000
-
Annual cash operating costs
11,000
8,500
Salvage value now
14,000
-
Salvage...
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