Question 2[Total marks: 22 marks]

Your company is considering investing in its own transport fleet. The present position is that carriage is contracted to an outside organization. The life of the transport fleet would be five years, after which time the vehicles would have to be disposed of. The cost to your company of using the outside organization for its carriage needs is $ 250,000 for this year. This cost, it is projected, will rise 10 per cent per annum over the life of the project. The initial cost of the transport fleet would be $ 750,000 and it is estimated that the following costs would be incurred over the next five years: