Roadrunner Freight Company owns a truck that cost $42,000. Currently, the trucks book value is $24,000, and its expected remaining useful life is four years. Roadrunner has the opportunity to purchase for $31,200 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $6,000 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $14,400.

Required

Calculate the total relevant costs. Should Roadrunner replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out?

Keep Old Replace with New

Total Relevant Costs

Should Roadrunner replace or continue the old truck?