Problem: Module 6 Textbook Problem 9

Learning Objective: 6-5 Make appropriate asset replacement decisions

Rundle Freight Company owns a truck that cost $46,000. Currently, the trucks book value is $22,000, and its expected remaining useful life is four years. Rundle has the opportunity to purchase for $31,400 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,100 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $18,000. Required Calculate the total relevant costs. Should Rundle replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out?