Adams County has 96 older model school buses that carry a salvage value (today) of $9.600 each. The county officials are contemplating replacing all the buses with 90 new larger ones, each costing $130,000.

If the county decides to keep the existing fleet, it will need to spend an additional $9,000 per bus to refurbish them. 50 buses will be refurbished immediately, 30 buses will be refurbished end of year 1, and the remaining at the end of 2nd year.

Project Life: 10 years

Bus Operations: The busses operate (on the average) 300 days per year. Average travel distance: Existing Fleet 70 miles/day/bus. New Fleet 60 miles/day/bus. Fuel Efficiency: Existing buses 7.2 mpg, new buses 14.5 mpg. Fuel Price: Fuel costs an average of $3.70/gallon in the 1st year and escalate at 6% per year.

Manpower: Driver wages are a major cost item. Other cost items are negligible and are not provided. Current Fleet: Requires 85 drivers each working an average of 4 hours/day for 300 days. New Fleet: Requires 80 drivers each working an average of 4 hours per day for 300 days. Driver wages: $20/hour in the 1st year and escalating at 3% per year

Bus Maintenance: Non-people related costs (like insurance, oil change etc.) is estimated to be: $9,500 per year per bus for the existing fleet. $8,000 per year per bus for the new fleet. The maintenance costs are expected to escalate at 4% per year.

Salvage Value: The expected salvage value at the end of the project life: New bus = $17,000 each. Existing Bus = $0 each. The county uses Cost of Capital (MARR) (i.e., interest rate) of 10%.

Determine: Net Present Value of keeping the existing fleet. Net Present Worth of acquiring the new fleet. Difference in Net Present Value of (New Old) fleet. Difference in Net Annual Value of (New Old) fleet.

Write a brief that includes evaluation of the two alternatives. Even though your brief will focus on financial results, use your knowledge and imagination to include non-financial factors in your brief. Keep the brief concise less than half page. I am not looking for a lengthy discussion.