In Chicago, deterioration of trucks from road salt used in winter months may require early replacement of
Question:
In Chicago, deterioration of trucks from road salt used in winter months may require early replacement of body parts if not the whole truck. Alternative methods of handling this situation from the standpoint of a certain owner are as follows:
a) Use "standard" body undercoating at a first cost of $300. As this is not entirely effective, deterioration necessitates replacement of the truck after 6 years of operation. The estimated salvage is $3,500.
b) Use a special coating and body materials costing $3,500 which will protect the truck through a 10-year life, at which time the salvage of the truck is $1,500. After the sixth year, however, the other parts of the truck will require extra maintenance estimated at $1,500 a year, beginning at the end of year 7.
c) Use "standard" body undercoating as in (a) and then rebuild the body for $4,000 at the end of year 6. Salvage of the truck at the end of 10 years will be $1,750. The added annual maintenance for other repairs will be the same as in the second method. 3 of 3 The original cost of the truck is $35,000. If the buyer can invest at 7% in other opportunities, what course of action do you recommend?
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr