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Joe and Tonya Rodeo are going to buy a new truck for their ranch. Relevant information about the two trucks is given below. If the
Joe and Tonya Rodeo are going to buy a new truck for their ranch. Relevant information about the two trucks is given below. If the after tax discount rate is 5%, which truck should they purchase. The original cost is paid out in year 0, the projected after tax cash flows are paid out each year. The salvage value is recouped in the final year. (Hint: you need to do the least common denominator of time or an annual annuity equivalent.) Original cost Projected economic life Projected after-tax annual cash flows Salvage Value Truck A $23,000 4 years $4,000 S3,500 Truck B $19,000 3 years S3,800 S3,000
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