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

$30,000

$24,000

Useful life

5 years

4 years

Salvage value

$7,000

$3,000

Operating cost per mile

$0.47

$0.40

a. With interest at 6% per year, determine the annual mileage at which the two trucks are equivalent.

b. For 17,000 miles per year in travel, which truck should be recommended?

Initial investment Useful life Salvage value Operating cost per mile Gasoline $30,000 5 years $7,000 $0.47 Diesel $24,000 4 years $3,000 $0.40 N 1 Discrete Compounding; 1=6% Single Payment Uniform Series Compound Compound Sinking Amount Present Amount Present Fund Factor Worth Factor Factor Worth Factor Factor To Find F To Find P To Find F To Find P To Find A Given P Given F Given A Given A Given F F/P P/F F/A P/A A/F 1.0600 0.9434 1.0000 0.9434 1.0000 1.1236 0.8900 2.0600 1.8334 0.4854 1.1910 0.8396 3.1836 2.6730 0.3141 1.2625 0.7921 4.3746 3.4651 0.2286 1.3382 0.7473 5.6371 4.2124 0.1774 1.4185 0.7050 6.9753 4.9173 0.1434 1.5036 0.6651 8.3938 5.5824 0.1191 1.5938 0.6274 9.8975 6.2098 0.1010 1.6895 0.5919 11.4913 6.8017 0.0870 1.7908 0.5584 13.1808 7.3601 0.0759 3 Capital Recovery Factor To Find A Given P A/P 1.0600 0.5454 0.3741 0.2886 0.2374 0.2034 0.1791 0.1610 0.1470 0.1359 4 5 6 7 8 9 10 Initial investment Useful life Salvage value Operating cost per mile Gasoline $30,000 5 years $7,000 $0.47 Diesel $24,000 4 years $3,000 $0.40 N 1 Discrete Compounding; 1=6% Single Payment Uniform Series Compound Compound Sinking Amount Present Amount Present Fund Factor Worth Factor Factor Worth Factor Factor To Find F To Find P To Find F To Find P To Find A Given P Given F Given A Given A Given F F/P P/F F/A P/A A/F 1.0600 0.9434 1.0000 0.9434 1.0000 1.1236 0.8900 2.0600 1.8334 0.4854 1.1910 0.8396 3.1836 2.6730 0.3141 1.2625 0.7921 4.3746 3.4651 0.2286 1.3382 0.7473 5.6371 4.2124 0.1774 1.4185 0.7050 6.9753 4.9173 0.1434 1.5036 0.6651 8.3938 5.5824 0.1191 1.5938 0.6274 9.8975 6.2098 0.1010 1.6895 0.5919 11.4913 6.8017 0.0870 1.7908 0.5584 13.1808 7.3601 0.0759 3 Capital Recovery Factor To Find A Given P A/P 1.0600 0.5454 0.3741 0.2886 0.2374 0.2034 0.1791 0.1610 0.1470 0.1359 4 5 6 7 8 9 10