A construction company is going to purchase several heavy-duty trucks. Its M.A.R.R. before taxes is 18%....

 

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A construction company is going to purchase several heavy-duty trucks. Its M.A.R.R. before taxes is 18%. It is considering two makes, and the following relevant data are available. Cost Life (estimated by manufacturer) Salvage value at end of life Annual out-of-pocket costs Wiltsbilt $10,000 3 years $2,000 $4,000 Big Mack $15,000 5 years $3,000 $3,000 (a) Which type of truck should be selected when the repeatability assumption is appropriate? (b) Which type of truck would you recommend if the study period is limited to 3 years (coterminated assumption) and it is estimated that a Big Mack truck will have a salvage value of $5,600 at that time? A construction company is going to purchase several heavy-duty trucks. Its M.A.R.R. before taxes is 18%. It is considering two makes, and the following relevant data are available. Cost Life (estimated by manufacturer) Salvage value at end of life Annual out-of-pocket costs Wiltsbilt $10,000 3 years $2,000 $4,000 Big Mack $15,000 5 years $3,000 $3,000 (a) Which type of truck should be selected when the repeatability assumption is appropriate? (b) Which type of truck would you recommend if the study period is limited to 3 years (coterminated assumption) and it is estimated that a Big Mack truck will have a salvage value of $5,600 at that time?

Answer rating: 100% (QA)

We can solve questions a and b above in as shown below PART A C... View the full answer