A recent graduate who wants to start an excavation/earth-moving business is trying to determine which size of used dump truck to buy. As the bed size increases, new income increases; however, the graduate is uncertain whether the incremental expenditure required for larger truck 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. Using a Do Nothing (DN) option, using SPREADSHEET only, a. Determine which size truck should be purchased. b. If two trucks are to be purchased, what should be size of the second truck?
A recent graduate who wants to start an excavation/earth-moving business is trying to determine which size of used dump truck to buy. As the bed size increases, new income increases; however, the graduate is uncertain whether the incremental expenditure required for larger truck 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. Using a Do Nothing (DN) option, using SPREADSHEET only, a. Determine which size truck should be purchased. b. If two trucks are to be purchased, what should be size of the second truck?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
A recent graduate who wants to start an excavation/earth-moving business is trying to
determine which size of used dump truck to buy. As the bed size increases, new income
increases; however, the graduate is uncertain whether the incremental expenditure required
for larger truck 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. Using a Do Nothing (DN) option, using SPREADSHEET only,
a. Determine which size truck should be purchased.
b. If two trucks are to be purchased, what should be size of the second truck?
determine which size of used dump truck to buy. As the bed size increases, new income
increases; however, the graduate is uncertain whether the incremental expenditure required
for larger truck 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. Using a Do Nothing (DN) option, using SPREADSHEET only,
a. Determine which size truck should be purchased.
b. If two trucks are to be purchased, what should be size of the second truck?
Transcribed Image Text:Truck Bed
Size, m³
8
10
15
20
25
First Cost
$
-30,000
-34,000
-38,000
-48,000
-57,000
Maintenance and
Operations, $/yr
-14,000
-15,500
-18,000
-21,000
-26,000
Salvage
value, $
2,000
2,500
3,000
3,500
4,600
Annual Revenues
$/Yr
26,500
30,000
33,500
40,500
49,000
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