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Consider two cash flow diagrams below of pizza delivery truck options (Truck A and Truck B) that a local restaurant is considering to purchase.

 

Consider two cash flow diagrams below of pizza delivery truck options (Truck A and Truck B) that a local restaurant is considering to purchase. The economic lives of these trucks are 5 and 4 years respectively for Truck A and Truck B. MODEL A S = $2,000 Annual Savings = $6,000 MODEL B S = $1,500 Annual Savings = $6,500 0 1 2 3 4 5 years 0 1 3 4 years Annual Maintenance Cost = $1,000 1 = $11,000 Annual Maintenance Cost = $1,000 I=$12,000 Suppose that the current mode of operation is expected to continue for an indefinite period. You also think that these two models will be available in the future without significant changes. At MARR=10%, which model should you select?

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