Chapter 17, Problem 22P

Your company needs to purchase a truck and has narrowed the selection to two pieces of equipment. The first truck costs $70,000 and has an hourly operation cost of $13.00 and a useful life of six years. At the end of six years its salvage value is $10,000. The second truck costs $40,000 and has an hourly operation cost of $18.00 and a useful life of four years. At the end of four years its salvage value is $5,000. The operator cost is $34.00 per hour. The revenue from either truck is $67.00 per hour. Using 1,500 billable hours per year and a MARR of 18%, calculate the NPV for both trucks. Assume that each option is repurchased until their useful lives end in the same year. Which truck should your company choose?