Friendly Freddie's Furniture Store uses an 8-year old van to deliver furniture to customers within a 50-mile radius of the store.The van has an original cost of $22,000.It costs $1,000 each month to operate the van.Unfortunately,the van was in an accident last week and it will cost $5,000 for repairs.Freddie has found a new van that will cost $35,000.Freddie expects to get 10 years use from the new van and estimates that the operating costs will be $800 each month.Freddie can sell his old van as is for $2,500.
Required:

Identify the amount and timing of the cash flows relevant to Friendly Freddie’s decision to replace the van.

Question

Friendly Freddie's Furniture Store uses an 8-year old van to deliver furniture to customers within a 50-mile radius of the store.The van has an original cost of $22,000.It costs $1,000 each month to operate the van.Unfortunately,the van was in an accident last week and it will cost $5,000 for repairs.Freddie has found a new van that will cost $35,000.Freddie expects to get 10 years use from the new van and estimates that the operating costs will be $800 each month.Freddie can sell his old van as is for $2,500.
Required:

Identify the amount and timing of the cash flows relevant to Friendly Freddie’s decision to replace the van.

Quizplus · Accepted Answer

The Answer of Friendly Freddie's Furniture Store uses an 8-year old van to deliver furniture to customers within a 50-mile radius of the store.The van has an original cost of $22,000.It costs $1,000 each month to operate the van.Unfortunately,the van was in an accident last week and it will cost $5,000 for repairs.Freddie has found a new van that will cost $35,000.Freddie expects to get 10 years use from the new van and estimates that the operating costs will be $800 each month.Freddie can sell his old van as is for $2,500.
Required:

Identify the amount and timing of the cash flows relevant to Friendly Freddie’s decision to replace the van.

Friendly Freddie's Furniture Store Uses an 8-Year Old Van to Deliver