The city council of morristown is considering the purchase, Ask an Expert

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The city council of Morristown is considering the purchase of one new ?re truck. The options are Truck X and Truck Y. The appropriate ?nancial data are as follows:

Truck X Truck Y

Capital investment $50,000 $64,000

Maintenance cost per year $6,000 $5,000

Useful life 6 years 6 years

Reduction in ?re damage $20,000 $22,000

per year

The purchase is to be ?nanced by money borrowed at 12% per year. Which ?re truck should be purchased?

The correct answer is Truck X.

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