Pompeil's Pizza has a delivery car that it uses for pizza deliveries. The transmission needs to...

 

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Pompeil'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. Pompeir's has put together the following. budgetary items: Present Car New Car B. What should Pompeii's do? New Car Purchase cost new Transmission and other repairs Annual cash operating cost Fair market value now Fair market value in five years 4,000 If Pompei'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 12%. $9,000 13,000 4,000 500 $31,000 10,000 (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 S Pompeil'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. Pompeir's has put together the following. budgetary items: Present Car New Car B. What should Pompeii's do? New Car Purchase cost new Transmission and other repairs Annual cash operating cost Fair market value now Fair market value in five years 4,000 If Pompei'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 12%. $9,000 13,000 4,000 500 $31,000 10,000 (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 S

Answer rating: 100% (QA)

To calculate the NPV Net Present Value for both options we need to calculate the present value of cash flows associated with each car Here are the ste... View the full answer