A start$-$up business is considering acquiring a long$-$haul truck and has narrowed the selection down to two options. The first option is to purchase a new truck for R$2650000.$ At the end of the seventh year, the resale value of the new truck is estimated to be R$725000.$ The second option is to purchase a used truck for R$1590000.$ At the end of the fourth year, the resale value of the used truck is estimated to be R$350000.$

Revenues from deliveries made will be the same for either truck. However, the operating costs $($fuel$,$ repairs and maintenance, as well as insurance$)$ will differ between the two trucks. Before$-$tax operating costs will be R$812500$ and R$1025000$ for the first year for the new and used truck, respectively. The operating costs will increase in line with inflation at a rate of $6\%$ per year from the beginning of the second year. Depreciation $($wear$-$and$-$tear allowance$)$ is written off on the trucks on a straightline basis over four years.

The business' cost of capital is $16\%$ and the corporate tax rate is $28\%.$

Required:

Using the relevant calculations, advise the business on which truck to purchase.

Hint: Ineed to calculate the Net Present Cost $($NPC$)$ and Equivalent Annual Costs $($EAC$)$ of each truck and make recommendations.