San Jose Flights S.A. of Panama has a small truck that it uses for intracity d

San Jose Flights S.A. of Panama has a small truck that it uses for intracity deliveries. The truck is worn out and must be either overhauled or replaced
with a new truck. The company has assembled the following information. (Panama uses the U.S. dollar as its currency):

Present Truck

New Truck

Purchase cost new

28000

42000

Remaining book value

18000

Overhaul needed now

9500

Annual cash operating costs

14000

11000

Salvage value-now

10000

Salvage value-10 years from now

2000

4000

If the company keeps and overhauls its present delivery truck then the truck will be usable for 10 more years. If a new truck is purchased it will be
used for 10 years after which it will be traded in on another truck. The new truck would be dieseloperated resulting in a substantial reduction in annual
operating costs as shown above.

The company computes depreciation on a straight-line basis. All investment projects are evaluated using a 16% discount rate.

Required:

1. Should San Jose Flights S.A. keep the old truck or purchase the new one? Use the total-cost approach to net present value in making your decision.
Round to the nearest whole dollar.

2. Redo (1) above this time using the incremental-cost approach.