Question
A firm is trying to decide between two types of trucks, one a conventional gasoline vehicle and the other a diesel powered. The following information
- A firm is trying to decide between two types of trucks, one a conventional gasoline vehicle and the other a diesel powered. The following information is available.
|
| Gasoline | Diesel |
| Initial investment | $27,000 | $21,000 |
| Useful life | 4 years | 3 years |
| Salvage value | $9,000 | $6,000 |
| Operating cost per mile | $0.42 | $0.36 |
a. With interest at 5% per year, determine the annual mileage at which the two trucks are equivalent.
b. For 15,000 miles per year in travel, which truck should be recommended?
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Essentials Of Applied Econometrics
Authors: Aaron D Smith, J Edward Taylor
1st Edition
0520288335, 9780520288331
