Answered: calculate the net present value for…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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your company needs to purchase a dump truck and has narrowed the selection down to two alternatives. the 1st alternative is to purchase a new dump truck for $65,000. at the end of the seventh year the salvage value of the new dump truck is estimated to be $15,000. the 2nd alternative is to purchase a used dump truck for $50,000. at the end of 4th year the salavage of the dump truck is estimated to be $5,000. the annual profits, revenues less operation costs, are $17,000 per year for either truck. using a MARR of 18% and twenty-eight years study period, calculate the net present value for each of the dump trucka. which truck should your company purchase?

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