Firm is trying to decide between two types of trucks, conventional diesel-powered vehicle. The following information is available. Gasoline Diesel tial investment P1,600,000 P1,350,000 seful life 5 years 4 years D600 000 5400 000
Firm is trying to decide between two types of trucks, conventional diesel-powered vehicle. The following information is available. Gasoline Diesel tial investment P1,600,000 P1,350,000 seful life 5 years 4 years D600 000 5400 000
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:A firm is trying to decide between two types of trucks, conventional gasoline vehicle and
a diesel-powered vehicle. The following information is available.
Gasoline
Diesel
Initial investment
P1,600,000
P1,350,000
Useful life
5 years
4 years
Salvage value
P600,000
P400,000
Operating cost per mile
P24
P18
a. With interest at 4% per year, determine the annual mileage at which the two trucks are
equivalent.
b. For 20,000 miles per year in travel, which truck should be recommended?
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