A recent graduate who wants to start an excavation/ earth-moving business is trying to determine which size of used dump truck to buy. He knows that as the bed size increases, the net income increases, but he is uncertain whether the incremental expenditure required for the larger trucks is justified. The cash flows associated with each size truck are estimated below. The contractor has established a MARR of 18% per year, and all trucks are expected to have a remaining economic life of 5 years. (a) Determine which size truck he should purchase. (b) If two trucks are to be purchased, what should be the size of the second truck? (Note: Problem 8.44 requests a spreadsheet solution of these alternatives.) Truck Bed Size, m3 Initial Investment, $ M&O, $/Year Salvage Value, $ Annual Revenue, $/Year 8 −30,000 −14,000 +2,000 +26,500 10 −34,000 −15,500 +2,500 +30,000 15 −38,000 −18,000 +3,000 +33,500 20 −48,000 −21,000 +3,500 +40,500 25 −57,000 −26,000 +4,600 +49,000
A recent graduate who wants to start an excavation/
earth-moving business is trying to determine
which size of used dump truck to buy. He knows
that as the bed size increases, the net income increases,
but he is uncertain whether the incremental
expenditure required for the larger trucks is justified. The cash flows associated with each size
truck are estimated below. The contractor has established
a MARR of 18% per year, and all trucks
are expected to have a remaining economic life of
5 years. (a) Determine which size truck he should
purchase. (b) If two trucks are to be purchased,
what should be the size of the second truck? (Note:
Problem 8.44 requests a spreadsheet solution of
these alternatives.)
Truck Bed
Size, m3
Initial
Investment, $
M&O,
$/Year
Salvage
Value, $
Annual Revenue,
$/Year
8 −30,000 −14,000 +2,000 +26,500
10 −34,000 −15,500 +2,500 +30,000
15 −38,000 −18,000 +3,000 +33,500
20 −48,000 −21,000 +3,500 +40,500
25 −57,000 −26,000 +4,600 +49,000
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