Suppose you own a fleet of vans which cost you per van: Initial cost of $30k;...

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Suppose you own a fleet of vans which cost you per van: Initial cost of $30k; Annual cost of $12k in the 1st year, $15k in the 2nd, $20 in the 3rd, $25 in the 4th; the salvage value is $20k at the end of 2nd year, $17k at the 3rd, $12K at the 4th. How often should you replace vans if the discount rate was 5%? Suppose you own a fleet of vans which cost you per van: Initial cost of $30k; Annual cost of $12k in the 1st year, $15k in the 2nd, $20 in the 3rd, $25 in the 4th; the salvage value is $20k at the end of 2nd year, $17k at the 3rd, $12K at the 4th. How often should you replace vans if the discount rate was 5%?

Answer rating: 100% (QA)

To determine how often the vans should be replaced we need to compare the present value of the costs of keeping each van for its entire life with the ... View the full answer