Jim-bob Co. is considering two alternatives to replace a delivery truck. The following data have been gathered concerning these two alternatives: Truck A Truck B Purchase cost new $50,000 $70,000 Major repairs end of year 2 $10,000 8,000 Annual cash operating costs $20,000 $18,000 Salvage value at the end of 3 years $15,000 $20,000 Jim-bob Co. uses a 10% discount rate and the incremental cost approach to capital budgeting analysis. Both trucks are expected to have a useful life of three years. In comparing these two alternatives, which is the correct evaluation?

Truck B should be purchased as the net present value of the costs of this alternative is the lowest.

Truck B should be purchased as the net present value of the costs of this alternative is the highest.

Truck A should be purchased as the net present value of the costs of this alternative is the highest.

Truck A should be purchased as the net present value of the costs of this alternative is the lowest.