Emkay carriers is considering the purchase of a new truck, Ask an Expert

Economics

EmKay Carriers is considering the purchase of a new truck to replace one of its aging trucks. The current truck has a remaining life of 5 years and it is expected to have a salvage value of $25,000 at the end of its useful life. Operating and maintenance costs have been $40,000/yr. Currently the truck has a market value of $75,000. A new truck will have an initial cost of $250,000 and an estimated life 15 years. Its market value at the end of 5 years is expected to be $150,000 and it has an annual operating and maintenance cost of $20,000. If this new truck is purchased, then the company expects to sell the existing truck at its market value. Based on a present worth analysis over a 5-year planning horizon, determine if the existing truck should be replaced or not, given MARR is 10% per year compounded annually.

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Business Economics, Economics

Category:- Business Economics
Reference No.:- M91928337

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