A firm uses a number of narrow-aisle forklift trucks and can purchase these in three types. Type

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A firm uses a number of narrow-aisle forklift trucks and can purchase these in three types. Type 1 costs $20,000 each; type 2 costs $10,000 each; and type 3 costs $5,000 each. Such equipment can be sold at the end of its useful life (ten years) for 15 percent of its original cost. The annual operating costs for each type of equipment are $2,000, $2,500, and $3,000, respectively per truck. Three type-1 units can do the work of five type-2 units or of seven type-3 units. If investments are to return 20 percent before taxes per truck, which equipment would be the best buy?
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