Question
A furniture store has just opened for business and needs to purchase a delivery truck. The cost of buying a new truck is $50,000. As
A furniture store has just opened for business and needs to purchase a delivery truck. The cost of buying a new truck is $50,000. As the truck ages, its operating costs increase and its resale value decreases, as indicated in the table below. For this reason, they will not keep any truck more than 4 years. Your goal is to develop a replacement policy that minimizes the total cost of owning and operating a delivery truck for the next 6 years. When accounting for the total cost, deduct the resale value of the truck at the end of six years (as if they will sell the truck after six years). Set up and solve a "shortest path" network model to determine the years in which a new truck should be purchased. (You may want to draw the network model first, but this is not required in your submission.) Age of Truck at Start of Year Operating Cost for the Following Year Resale Value at End of Year 0 $6000 $35,000 1 $7000 $24,000 2 $11,000 $18,000 3 $17,000 $10,000
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