Arnold Inc. is considering the purchase of a new truck. It can choose between two brands.

Brand A: buying the new truck for $120,000. This brand-A truck lasts for 7 years and save the

company $50,000 a year in expenses (before tax).

Brand B: buying the new truck for $80,000. This brand-B truck lasts for 5 years and save the

company $40,000 a year in expenses (before tax).

The opportunity cost of capital is 12% and the firms tax rate is 35%. Assume that the company

will replace the truck at the end of its life. The company uses straight-line depreciation. Which

brand should the company choose for the new truck?