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Hi, I am really struggling with this question. Please explain all the steps and calculations required. Jimbob Co. is considering replacing its existing fleet of
Hi, I am really struggling with this question. Please explain all the steps and calculations required.
Jimbob Co. is considering replacing its existing fleet of trucks with new trucks. Estimates for the next three years are as follows:
Based strictly on the financial information presented above, should the company replace the old trucks now? (Ignore time value of money).
Old trucks | New trucks | |
Average annual sales | $500,000 | $520,000 |
Annual operating costs | $100,000 | $75,000 |
Original costs of old trucks | $100,000 | - |
Remaining book value of old | $10,000 | - |
List price of new trucks | - | $120,000 |
Remaining life | 3 years | - |
Expect life | - | 3 years |
Disposal value now | $10,000 | - |
Disposal value in 3 years | $nil | $nil |
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