Question
A construction company is looking to buy new pickup trucks. The company owner is considering two similar in size models: 2022 Chevy Silverado for $45,000
A construction company is looking to buy new pickup trucks. The company owner is considering two similar in size models: 2022 Chevy Silverado for $45,000 or 2022 Ford F150 for $38,000. Both models will be used for 10 years, then written off (will have $0 value at the end). The Silverado averages 27 miles/gallon. The F150 averages 23 miles/gallon. The owner anticipates the monthly truck mileage to be around 3,000 miles. All other expenses, such as maintenance, emissions, etc. are expected to be the same for both models. If the firms weighted average cost of capital is 12% APR, truck loan payments will be made at the end of each month, and gas is expected to cost around $3.20/gallon, which truck should the owner purchase and why? Make sure to provide quantitative evidence to support your recommendation.
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