Your brother, a new college graduate, wants to be his own boss. He wants to open a

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Your brother, a new college graduate, wants to be his own boss. He wants to open a restaurant in a small strip center or acquire and operate a food truck, an increasingly popular mode of eating, especially in larger cities. The restaurant space can be rented for $2200 per month. Modest furnishings and used equipment will have a first cost of $26,000. Income is expected to be $14,100 per month, with expenses for utilities, labor, taxes, etc. expected to average $3700 per month. Alternatively, a kitchen-ready food truck will cost $17,900 to purchase and $900 per month to operate. Income is expected to be $6200 per month. If the salvage values are assumed to be 10% of the first cost for the restaurant and 35% of the first cost of the truck after a 5-year planning period, which alternative is better on the basis of an annual worth comparison at an interest rate of 12% per year, compounded monthly? Also, write the spreadsheet functions to find the AW values.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Engineering Economy

ISBN: 978-0073523439

8th edition

Authors: Leland T. Blank, Anthony Tarquin

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