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The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4Runners for company principals. The purchase price for the Ford Explorer will be $29,250. Annual maintenance costs for the Explorer are expected to be $650 per year more than that of the 4Runner. The purchase price for Toyota 4Runners is 36,000 The trade-in values after 3 years are estimated to be 50% of the first cost for the Explorer and 60% for the 4Runner. (a) What is the incremental ROR between the two vehicles? (b) Provided the firm's MARR is 30% per year, which vehicle should it buy? a) The incremental ROR between the two vehicles is 11 %. b) The firm should buy Ford Explorer as the incremental ROR is greater than the MARR.

The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4Runners for company principals. The purchase price for the Ford Explorer will be $29,250. Annual maintenance costs for the Explorer are expected to be $650 per year more than that of the 4Runner. The purchase price for Toyota 4Runners is 36,000 The trade-in values after 3 years are estimated to be 50% of the first cost for the Explorer and 60% for the 4Runner. (a) What is the incremental ROR between the two vehicles? (b) Provided the firm's MARR is 30% per year, which vehicle should it buy? a) The incremental ROR between the two vehicles is 11 %. b) The firm should buy Ford Explorer as the incremental ROR is greater than the MARR.

Applications and Investigations in Earth Science (9th Edition)
Applications and Investigations in Earth Science (9th Edition)
9th Edition
ISBN:9780134746241
Author:Edward J. Tarbuck, Frederick K. Lutgens, Dennis G. Tasa
Publisher:Edward J. Tarbuck, Frederick K. Lutgens, Dennis G. Tasa
Chapter1: The Study Of Minerals
Section: Chapter Questions
Problem 1LR
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The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4Runners for company principals. The purchase price for the Ford Explorer will be $29,250. Annual maintenance costs for the Explorer are expected to be $650 per year more than that of the 4Runner. The purchase price for Toyota 4Runners is 36,000 The trade-in values after 3 years are estimated to be 50% of the first cost for the Explorer and 60% for the 4Runner. (a) What is the incremental ROR between the two vehicles? (b) Provided the firm's MARR is 30% per year, which vehicle should it buy? a) The incremental ROR between the two vehicles is 11 %. b) The firm should buy Ford Explorer as the incremental ROR is greater than the MARR.
Transcribed Image Text:The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4Runners for company principals. The purchase price for the Ford Explorer will be $29,250. Annual maintenance costs for the Explorer are expected to be $650 per year more than that of the 4Runner. The purchase price for Toyota 4Runners is 36,000 The trade-in values after 3 years are estimated to be 50% of the first cost for the Explorer and 60% for the 4Runner. (a) What is the incremental ROR between the two vehicles? (b) Provided the firm's MARR is 30% per year, which vehicle should it buy? a) The incremental ROR between the two vehicles is 11 %. b) The firm should buy Ford Explorer as the incremental ROR is greater than the MARR.
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