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The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4 Runners for company principals. The purchase price for the
The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4 Runners for company principals. The purchase price for the Ford Explorer will be $30,000. Annual maintenance costs for the Explorer are expected to be $625 per year more than that of the 4R Rnner. The purchase price for Toyota 4R unners is 37250 The trade-in values after 3 years are estimated to be 50% of the first cost for the Explorer and 60% for the 4 Runner. (a) What is the incremental ROR between the two vehicles? (b) Provided the firm's MARR is 21% per year, which vehicle should it buy? a) The incremental ROR between the two vehicles is b) The firm should buy as the incrementat ROR is the MARR
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