Finch Freight Company owns a truck that cost $36,000. Currently, the truck's book value is $29,000, and its expected remaining useful life is five years. Finch has the opportunity to purchase for $23,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,600 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $12,000. Required Calculate the total relevant costs. Should Finch replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Total relevant costs Should Finch replace or continue the old truck? Keep Old Replace With New
Finch Freight Company owns a truck that cost $36,000. Currently, the truck's book value is $29,000, and its expected remaining useful life is five years. Finch has the opportunity to purchase for $23,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,600 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $12,000. Required Calculate the total relevant costs. Should Finch replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out? Total relevant costs Should Finch replace or continue the old truck? Keep Old Replace With New
Chapter10: Capital Budgeting: Decision Criteria And Real Option
Section: Chapter Questions
Problem 9P
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