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A local US Postal Service office is considering purchasing a 4000-pound forklift truck, which will be used primarily for processing incoming as well as outgoing

A local US Postal Service office is considering purchasing a 4000-pound forklift truck, which will be used primarily for processing incoming as well as outgoing postal packages. Forklift trucks traditionally have been fueled by either gasoline, liquid propane gas (LPG) or diesel fuel. Battery-powered electric forklifts, however, are increasingly popular in many industrial sectors due to the economic and environmental benefits that accrue from their use. Therefore, the postal service is interested in comparing forklifts that use the four different types of fuel.

DESCRIPTION

Electrical

LPG

Gasoline

Diesel

Life Expectancy

7 years

7 years

7 years

7 years

Initial Cost

$29,739

$21,200

$20,107

$22,263

Salvage Value

$3,000

$2,000

$2,000

$2,200

Max shift per year

260

260

260

260

Fuel consumption/shift

31.25 kWh

11 gal

11.1 gal

7.2 gal

Fuel cost/unit

$0.10/kWh

$3.50/gal

$2.24/gal

$2.45/gal

Fuel cost/shift

$3.125

$38.5

$24.86

$17.64

Annual maintenance (fixed costs)

$500

$1,000

$1,000

$1,000

Variable cost/shift

$4.5

$7

$7

$7

The purchase cost as well as annual operating and maintenance costs are provided by a local utility company and the Lead Industries Association. Annual fuel and maintenance costs are measured in terms of number of shifts per year, where one shift is equivalent to eight hours of operations.

The postal service is unsure of the number of shift per year, but it expects it should be somewhere between 200 and 260 shift. Since the US Postal Service does not pay income taxes, no depreciation or tax information is required. The US government uses 10% as an interest rate for any project evaluation of this nature. Develop a sensitivity graph that shows how the choice of alternatives changes as a function of number of shifts per year.

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