For some years, Mel has contracted with several major pizza retailers for home delivery services. He uses a MARR of 12% per year in all business dealings. His current van, purchased 10 years ago for $75,000, can be used for 3 more years, with an AOC of $23,000 and an estimated $25,000 trade-in value. A better-equipped van will cost $137,500, have an economic life of 6 years, an estimated trade-in value of $45,000, an AOC of $32,000 per year, and will generate an estimated $17,000 per year additional revenue. On the basis of these estimates, what market value now for the current van will make the new van equally attractive? Solve by spreadsheet or factors, as requested by your instructor.

For some years, Mel has contracted with several major pizza retailers for home delivery services. He uses a MARR of 12% per year in all business dealings. His current van, purchased 10 years ago for $75,000, can be used for 3 more years, with an AOC of $23,000 and an estimated $25,000 trade-in value. A better-equipped van will cost $137,500, have an economic life of 6 years, an estimated trade-in value of $45,000, an AOC of $32,000 per year, and will generate an estimated $17,000 per year additional revenue. On the basis of these estimates, what market value now for the current van will make the new van equally attractive? Solve by spreadsheet or factors, as requested by your instructor.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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