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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
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 9 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 7 year and Save the company $40,000 a year in expenses (before tax). The opportunity cost of capital is 12% and the firm's 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
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