Pompeii's Pizza has a delivery car that it uses for pizzadeliveries. The transmission needs...

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Accounting

Pompeii's Pizza has a delivery car that it uses for pizzadeliveries. The transmission needs to be replaced and there areseveral other repairs that need to be done. The car is nearing theend of its life, so the options are to either overhaul the car orreplace it with a new car. Pompeii's has put together the followingbudgetary 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 deliveryvehicle, they expect to be able to use the vehicle for another 5years. If they sell the old vehicle and purchase a new vehicle,they will use that vehicle for 5 years and then trade it in foranother new pizza delivery vehicle. If they trade for the newdelivery vehicle, their operating expenses will decrease becausethe new vehicle is more gas efficient and the maintenance on a newcar is less. This project is analyzed using a discount rate of10%.
(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 andthe rest to nearest dollar.
Present Car $
New Car $

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In: AccountingPompeii's Pizza has a delivery car that it uses for pizzadeliveries. The transmission needs to...Pompeii's Pizza has a delivery car that it uses for pizzadeliveries. The transmission needs to be replaced and there areseveral other repairs that need to be done. The car is nearing theend of its life, so the options are to either overhaul the car orreplace it with a new car. Pompeii's has put together the followingbudgetary items:Present CarNew CarPurchase cost new $32,000Transmission and other repairs$8,500Annual cash operating cost12,50010,000Fair market value now6,000Fair market value in five years5006,000If Pompeii’s replaces the transmission of the pizza deliveryvehicle, they expect to be able to use the vehicle for another 5years. If they sell the old vehicle and purchase a new vehicle,they will use that vehicle for 5 years and then trade it in foranother new pizza delivery vehicle. If they trade for the newdelivery vehicle, their operating expenses will decrease becausethe new vehicle is more gas efficient and the maintenance on a newcar is less. This project is analyzed using a discount rate of10%.(Click here to see present value and future value tables)A. Calculate the NPV on both Cars.Round your present value factor to three decimal places andthe rest to nearest dollar.Present Car$New Car$

	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