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A truck was purchased four years ago for $58, 000 to move raw materials and finished goods between a production facility and four remote warehouses.
A truck was purchased four years ago for $58, 000 to move raw materials and finished goods between a production facility and four remote warehouses. This truck (the defender) can be sold at the present time for $40, 000 and replaced by a new truck (the challenger) with a purchase price of $70, 000. a. Given the MVs and operating and maintenance costs what is the economic life of the challenger if MARR = 6%? b. Suppose that the defender was set upon a depreciation schedule with a five-year MACRS class life at the time of its purchase (four years ago). The corresponding depreciation rates are 20%, 32%, 19.2%, 11.52%, 11 52% and 5.76%. The tax rate is 40%. The defender can be sold now for $40, 000, or a rebuilt engine and transmission can be purchased and installed at a cost of $18, 000 (capital investment with three-year depreciable life, straight line, salvage value = 0). If the defender is kept in service, assume that it will have operating and maintenance costs as shown in Part (a) and a MV of $0 at the end of four years Determine the ATCFs for the defender. a. The economic life of the challenger is 3 year(s). (Round to the nearest whole number.) b. Fill in the following table with the ATCFs for the defender. (Round to the nearest dollar)
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