9.5. A restaurant is trying to determine which of two delivery trucks to purchase. The standard model costs $15,000 and the deluxe model costs $18,000. Both have a working life of 5 years and will be depreciated using the straight-line depreciation. The salvage values are $2,000 for the standard and $2,500 for the deluxe. The yearly operating costs are $4,500 for the standard model and $3,500 for the deluxe model. The deluxe truck will require a $1,500 servicing after 3 years. The WACC is 15%. Assume that both trucks will be sold at a price equal to their salvage value at the end of 5 years. The firms tax rate is 40%.

Required

Calculate the present value of the cost of owning each truck and indicate which should be purchased.