Revenues from deliveries made will be the same for either truck. However, the operating costs (fuel,...

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Revenues from deliveries made will be the same for either truck. However, the operating costs (fuel, repairs and maintenance, as well as insurance) will differ between the two trucks. Before-tax operating costs will be R812 500 and R1 025 000 for the first year for the new and used truck, respectively. The operating costs will increase in line with inflation at a rate of 6% per year from the beginning of the second year. Depreciation (wear-and-tear allowance) is written off on the trucks on a straight- line basis over four years. The business' cost of capital is 16% and the corporate tax rate is 28%. Required: Using the relevant calculations, advise the business on which truck to purchase. Hint: Students need to calculate the Net Present Cost (NPC) and Equivalent Annual Costs (EAC) of each truck and make recommendations. (15) Revenues from deliveries made will be the same for either truck. However, the operating costs (fuel, repairs and maintenance, as well as insurance) will differ between the two trucks. Before-tax operating costs will be R812 500 and R1 025 000 for the first year for the new and used truck, respectively. The operating costs will increase in line with inflation at a rate of 6% per year from the beginning of the second year. Depreciation (wear-and-tear allowance) is written off on the trucks on a straight- line basis over four years. The business' cost of capital is 16% and the corporate tax rate is 28%. Required: Using the relevant calculations, advise the business on which truck to purchase. Hint: Students need to calculate the Net Present Cost (NPC) and Equivalent Annual Costs (EAC) of each truck and make recommendations. (15)