Answered

At Westonci.ca, we provide reliable answers to your questions from a community of experts. Start exploring today! Explore thousands of questions and answers from a knowledgeable community of experts ready to help you find solutions. Get precise and detailed answers to your questions from a knowledgeable community of experts on our Q&A platform.

You are considering purchasing a dump truck. The truck will cost $45,000 and have an operating and maintenance cost that starts at $15,000 the first year and increases by $2,000 per year thereafter. Assume that the salvage value at the end of 5 years is $9,000 and interest rate is 12%. The equivalent annual cost of owning and operating the truck is most nearly:

Sagot :

anthougo

Answer:

The equivalent annual cost of owning and operating the truck is most nearly:

= $29,616.

Explanation:

a) Data and Calculations:

                                                    Costs          PV Factor       Present Value

Year 0 Truck purchase           $45,000          1                       $45,000

Year 1  Operating &

           maintenance cost          15,000          0.893                  13,395

Year 2 O&M cost                       17,000          0.797                  13,549

Year 3 O&M cost                       19,000          0.712                  13,528

Year 4 O&M cost                       21,000          0.636                 13,356

Year 5 O&M costs                    23,000          0.567                  13,041

Year 5 Salvage value                -9,000          0.567                  -5,103

Total costs                                                                             $106,766

Annuity factor at 12% after 5 years = 3.605

Equivalent annual cost = $29,616 ($106,766/3.605)

Thank you for visiting. Our goal is to provide the most accurate answers for all your informational needs. Come back soon. We appreciate your time. Please come back anytime for the latest information and answers to your questions. Get the answers you need at Westonci.ca. Stay informed by returning for our latest expert advice.