Chaotic Industries is considering an investment in a fleet of ten delivery vans to deliver its products

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Chaotic Industries is considering an investment in a fleet of ten delivery vans to deliver its products to customers. The vans will cost £15,000 each, which will be payable immediately. The annual running costs are expected to total £50,000 for each van (including the driver’s salary). The vans are expected to operate successfully for six years, at the end of which period they will all be sold. The disposal proceeds are expected to be £3,000 a van. At present, the business outsources transport, for all of its deliveries, to a commercial carrier. The carrier is expected to charge a total of £530,000 each year for the next six years to undertake this service.

What is the ARR of buying the vans? (Note that cost savings are as relevant a benefit from an investment as are net cash inflows.)

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