A company owns a fleet of trucks and operates its own maintenance shop. A particular type of truck, generally used for five years, has an initial cost of $75,000 and a salvage value of $15,000. Maintenance cost is $5,000 per year, and it increases by $2000 yearly. Assuming interest at 10%, find the equivalent annual cost of owning and maintaining the truck.

A company owns a fleet of trucks and operates its own maintenance shop. A particular type of truck, generally used for five years, has an initial cost of $75,000 and a salvage value of $15,000. Maintenance cost is $5,000 per year, and it increases by $2000 yearly. Assuming interest at 10%, find the equivalent annual cost of owning and maintaining the truck.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A company owns a fleet of trucks and operates its own maintenance shop. A particular type of truck,
generally used for five years, has an initial cost of $75,000 and a salvage value of $15,000. Maintenance
cost is $5,000 per year, and it increases by $2000 yearly. Assuming interest at 10%, find the equivalent
annual cost of owning and maintaining the truck.

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