A transportation company is in high demand recently due to the pandemic of COVID19. It is...
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A transportation company is in high demand recently due to the pandemic of COVID19. It is working on seizing the growing demand to increase its market share. Thus, the company is considering satisfying the long-distance demand by a fuel- efficient truck. Three alternatives are under consideration, the first is to rent the needed truck at an annual cost of $8,500 that has fuel consumption of 32 liters per 100 km. The second and third alternatives are to buy the needed truck. Truck MV is the alternative 2 that has $40,000 as a first cost, annual operating cost of $3000, and salvage $5000 for 10 years useful life. Truck UT is the third alternative that has $60,000 as a first cost, annual operating cost of $4500, and salvage $5000 for 12 years useful life. The fuel consumption of MV and UT is 25 and 18 liters per 100 km, respectively. The diesel fuel price is $1.15 per liter. Determine, which and when to get the best alternative at 12% MARR. A transportation company is in high demand recently due to the pandemic of COVID19. It is working on seizing the growing demand to increase its market share. Thus, the company is considering satisfying the long-distance demand by a fuel- efficient truck. Three alternatives are under consideration, the first is to rent the needed truck at an annual cost of $8,500 that has fuel consumption of 32 liters per 100 km. The second and third alternatives are to buy the needed truck. Truck MV is the alternative 2 that has $40,000 as a first cost, annual operating cost of $3000, and salvage $5000 for 10 years useful life. Truck UT is the third alternative that has $60,000 as a first cost, annual operating cost of $4500, and salvage $5000 for 12 years useful life. The fuel consumption of MV and UT is 25 and 18 liters per 100 km, respectively. The diesel fuel price is $1.15 per liter. Determine, which and when to get the best alternative at 12% MARR.
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To determine which alternative is the best we need to calculate the present worth PW of each alternative and choose the one with the lowest cost Lets ... View the full answer
Related Book For
Management Accounting
ISBN: 9780730369387
4th Edition
Authors: Leslie G. Eldenburg, Albie Brooks, Judy Oliver, Gillian Vesty, Rodney Dormer, Vijaya Murthy, Nick Pawsey
Posted Date:
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