A four-year-old truck has a present net realizable value of $6,000 and is now ex

Question

A four-year-old truck has a present net realizable value of $6,000 and is now expected to have a market value of $1,800 after its remaining three-year life. Its operating disbursements are expected to be $720 per year. An equivalent truck can be leased for $0.40 per mile plus $30 a day for each day the truck is kept. The expected annual utilization is 3,000 miles and 30 days. If the before-tax MARR is 15%, find which alternative is better by comparing before-tax equivalent annual costs.

a.

Either

b.

Old truck

c.

None

d.

Truck to be leased

Explanation / Answer

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