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

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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