Question 1 A pipeline contractor can purchase a needed truck for $35,000. Its es

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Question 1 A pipeline contractor can purchase a needed truck for $35,000. Its estimated life is 6 years, and it has no salvage value. Maintenance is estimated to be $2,600 per year, operating expense is $60 per day. The contractor can hire a similar unit for $140 per day. MARR is 7%. Click here to access the TVM Factor Table Calculator How many days per year must the truck's services be needed such that the two alternatives are equally costly? days Carry all interim calculations to 5 decimal places and then round your final answer up to the nearest day. The tolerance is ±4. If the truck is needed for 180 days/year, should the contractor buy the truck or hire the similar unit? Determine the dollar amount of annual savings generated by using the preferred alternative rather than the nonpreferred. $ Carry all interim calculations to 5 decimal places and then round your final answer to the nearest dollar. The tolerance is ±5.

Explanation / Answer

Life of project (Years)                      6 1/(1+.07)^n Initial Investment         (35,000) 1 0.934579 Maintenance           (2,600) 2 0.873439 Operating Cost                 (60) 3 0.816298 Total Annual Cost           (2,660) 4 0.762895 Discount Factor         4.76654 5 0.712986 PV          -12,679 6 0.666342 NPV of the project          -47,679 4.76654 Discount Factor         4.76654 EUAC    -10,002.85 10003=140x x=72 Days At 72 days cost of both the options will have same cost If truck run 180 days in a year If hire cost will 180*140=25200 Cost of own purchases truck=10,003 Saving=15,197

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