Pompeii's Pizza has a delivery car that it uses for pizza deliveries. The transmission needs to be replaced andthere are several other repairs that need to be done. The car is nearing the end of its life, so the options are toeither overhaul the car or replace it with a new car. Pompeii's has put together the following budgetary items:Present CarNew CarPurchase cost new$30,000Transmission and other repairs$8,500Annual cash operating cost13,00011,000Fair market value now5,000Fair market value in five years1,0005,000If Pompeii's replaces the transmission of the pizza delivery vehicle, they expect to be able to use the vehicle foranother 5 years. If they sell the old vehicde and purchase a new vehicle, they will use that vehicle for 5 yearsand then trade it in for another new pizza delivery vehicle. If they trade for the new delivery vehicle, theiroperating expenses will decrease because the new vehicle is more gas efficient and the maintenance on a newcar is less. This project is analyzed using a discount rate of 15%.(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 tonearest dollar.Present Car $New CarB. What should Pompeii's do?Pompeii's should

The question is based on the concept of Financial Management.

Pompei'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 t either overhaul the car or replace it with a new car. Pompei'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 13,000 11,000 Fair market value now 5,000 Fair market value in five years 1,000 5,000 If Pompeii's replaces the transmission of the pizza delivery vehicle, they expect to be able to use the vehicle fo 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

Pompei'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 t either overhaul the car or replace it with a new car. Pompei'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 13,000 11,000 Fair market value now 5,000 Fair market value in five years 1,000 5,000 If Pompeii's replaces the transmission of the pizza delivery vehicle, they expect to be able to use the vehicle fo 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

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter11: Capital Budgeting Decisions

Section: Chapter Questions

Problem 8PA: Pompeiis Pizza has a delivery car that it uses for pizza deliveries. The transmission needs to be...

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Pompeiis 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. Pompeiis has put together the following budgetary items: If Pompeiis 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 for 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%. What should Pompeiis do?
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 $31,000 Transmission and other repairs $8,000 Annual cash operating cost 12,000 11,000 Fair market value now 4,000 Fair market value in five years 500 4,000 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…
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 $31,000 Transmission and other repairs $9,000 Annual cash operating cost 13,000 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…
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 $8,000 Annual cash operating cost 12,500 10,000 Fair market value now 4,000 Fair market value in five years 1,000 4,000 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.…
Papa John’s Pizza has a delivery car that is 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. Papa John’s has put together the following budgetary items: Present Car New Car Purchase cost new $30,000 Transmission and repairs $6,500 Annual cash operating cost $8,500 $7,500 Fair market value now $6,000 Fair market value in five years $1,000 $6,000 If Papa John replaces the transmission of the pizza delivery vehicle, they expect to be able to use the vehicle for another 5 years. If they purchase a new vehicle, they will sell the existing one and use the new 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…
D&M Pizza has a delivery car that is 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. D&M’s has put together the following budgetary items: (See Picture1) If D&M replaces the transmission of the pizza delivery vehicle, they expect to be able to use the vehicle for another 5 years. If they purchase a new vehicle, they will sell the existing one and use the new 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. This project is analyzed using a discount rate of 15%. What should D&M do?
Print Rem 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 s nearing the end of its life, so the options are to either overhaul the car or replace it with a new car. Pompell's has put together the following budgetary items: Present Car New Car Purchase cost new Transmission and other repairs. Annual cash operating cost Fair market value now. $8,500 12,000 6,000 500 ✓ $32,000 11,000 Fair market value in five years 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…
A local sanitation authority needs to purchase a new garbage truck. The authority has two truck models under consideration. The purchase price for Model A is $90, 000. The maintenance and operation costs are $10,000/year. Model B is less expensive to acquire ($60,000 at purchase), but costs more on operation and maintenance. Details of the costs are shown in the table below. Interest rate is 4%. Please help this authority to decide which truck they should purchase. Year Model A Truck Model B Truck Purchase Price (beginning of year) $90,000 $60,000 Annual Operation and Maintenance (end of year) 1 $10,000 $20,000 2 $10,000 $20,000 3 $10,000 $20,000 4 $10,000 $20,000 The authority charges garbage collection fees from local residents. The estimated fee collection is $38,000 per year. Compare the present value of total costs of the truck model you choose and the present value of total revenues. Calculate the present value of total…
A local sanitation authority needs to purchase a new garbage truck. The authority has two truck models under consideration. The purchase price for Model A is $90, 000. The maintenance and operation costs are $10,000/year. Model B is less expensive to acquire ($60,000 at purchase), but costs more on operation and maintenance. Details of the costs are shown in the table below. Interest rate is 4%. Please help this authority to decide which truck they should purchase. Year Model A Truck Model B Truck Purchase Price (beginning of year) $90,000 $60,000 Annual Operation and Maintenance (end of year) 1 $10,000 $20,000 2 $10,000 $20,000 3 $10,000 $20,000 4 $10,000 $20,000 Calculate the present values of total costs for Model A Truck and Model B Truck, respectively. (Interest rate: 4%) (2’) Present value of Model A Truck total costs: Present value of Model B Truck total costs: Which truck model should this authority choose? Why? (1’)
Print Item 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 12,000 11,000 Fair market value now 5,000 Fair market value in five years 1,000 5,000 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…
A local sanitation authority needs to purchase a new garbage truck. The authority has two truck models under consideration. The purchase price for Model A is $90, 000. The maintenance and operation costs are $10,000/year. Model B is less expensive to acquire ($60,000 at purchase), but costs more on operation and maintenance. Details of the costs are shown in the table below. Interest rate is 3%. Please help this authority to decide which truck they should purchase. Year Model A Truck Model B Truck Purchase Price $90,000 $60,000 Annual Operation and Maintenance 1 $10,000 $20,000 2 $10,000 $20,000 3 $10,000 $20,000 4 $10,000 $20,000 Calculate the present values of total costs for Model A Truck and Model B Truck, respectively. (Interest rate: 3%) (1’) *Results round to the nearest 2 decimal places. (Note: you may consider using an Excel worksheet to do the calculation). Present value of Model A Truck…
A local waste management company needs to purchase a new garbage truck. The company has two truck models under consideration. The purchase price for Model A is $90, 000. The maintenance and operation costs are $10,000/year. Model B is less expensive to acquire ($60,000 at purchase), but costs more on operation and maintenance. Details of the costs are shown in the table below. Interest rate is 4%. Please help this company to decide which truck they should purchase. Year Model A Truck Model B Truck Purchase Price (beginning of year) $90,000 $60,000 Annual Operation and Maintenance (end of year) 1 $10,000 $20,000 2 $10,000 $20,000 3 $10,000 $20,000 4 $10,000 $20,000 Calculate the present values of total costs for Model A Truck and Model B Truck, respectively. (Interest rate: 4%) *Results round to the nearest 2 decimal places. (Note: you may consider using an Excel…