Assume a gravel truck was purchased two years ago by the City of Lethbridge for $300,000. Today, it is announced that a similar truck can be purchased for $310,000. The newest truck will save the city $5,000 per year in operational costs compared to the truck purchased two years ago. Each truck has an estimated useful life of five years and will be used 100,000 kms. per year. If the new truck is purchased, the maintenance contract with the seller will be reduced from $25,000 per 100,000 km. of use to $20,000. The old truck can be sold for $200,000 in one years time. In the meantime, it will be used as a temporary replacement vehicle for out-of-service trucks. Assume that the cost of borrowing is 6%, no income taxes apply, and that the maintenance contract and operational costs are paid at each year-end. State any additional assumptions you make.

Required: Determine if the new gravel truck should be purchased.