Question 2 (25 marks) Read the case study below and answer the questions that follow: Dankogistics (Danko), a trucking and logistics company, is considering acquiring five additional trucks to cope with the increase in demand for its transportation services. The acquisition of the additional trucks is expected to increase revenues by R10.35 million in the first year, R12.72 million in the second year, R13.89 million in the third year, R15.24 million in the fourth year and R16.48 million in the fifth year. Management is contemplating acquiring new or used trucks: New trucks cost R1 130 700 each and are expected to have a useful life of five years. It is estimated that the new trucks will have a resale value equal to 35% of cost at the end of their useful lives. The new trucks will be under a service and preventative maintenance plan for the first two years. It is estimated that repairs and maintenance of the trucks will cost R285 800 in the third year, R309 560 in the fourth year and R355 798 in the fifth year. The company estimates that it will spend R1.36 million on fuel for the trucks in the first year. Fuel costs are expected to increase by 10% per year. It will cost the company R236 875 per year to insure the trucks. Used trucks cost R825 000 per truck and are expected to have a useful life of three years. The trucks are expected to have resale value equal to 20% of cost at the end of their useful lives. It is estimated that repairs and maintenance of the trucks will cost R395 930 in the first year, R449 860 in the second year and R508 675 in the third year. The company estimates that it will spend R1.82 million on fuel for the trucks in the first year. Fuel costs are expected to increase by 10% per year. It will cost the company R187 448 per year to insure the trucks. The trucks are depreciated on a straight-line basis over their useful lives for tax purposes. Danko's cost of capital is 15%. The company is subject to a 28% corporate tax rate. Required: 2.1 Based on relevant calculations, advise Danko's management on whether to acquire the new or used trucks. (20) 2.2 Advise the management of the non-financial factors they need to consider before making a final decision on whether to acquire the new or used trucks. (5)