-The company has an ''Old truck is 5 years old'' they have been experiencing glitching with the old truck.

-A buyer offered to buy the old truck for $35k which is the Book Value of the old truck. If the company decided not to sell the old truck and keep the old truck, there old truck will depreciate for $6k per year for 5 years.

-Therefore, the old truck will be unserviceable and sold for $5K as scrap. Keeping the old truck will mean the company will need to pay $28k now for maintenance and $7k regular maintenance per annum over 5 years. In year 3 of the 5 years the old truck will need a major service of $4k.

The other option the company has is to buy a new truck. The new truck will increase productivity up to 40% for the company. The cost of the new machine is $140k with straight line depreciation of 10% per year over 5 years and on-sold for $60k at the end of 5 years.

Mono Pty Ltd would like to make a decision on whether to purchase a new truck or keep the old truck?

• The maintance of the new truck is $2000 in year 1 and $3000 per year after.
• The purchase will require a loan @ 6% interest-only payments for 5 years with the principal of the loan repaid at the end of the 5 year. The saving buying the new truck: 10% less in labour (existing rate: $30 per hour @ 35 hr weeks in a 50 week year.
• The labour saving cost will increase by fixed $250 a year. Electricity saving expected @ 10% as well, which will be $5.625 p/hr, 24 hours @ 7 days a week within a 50 week year. The total saved per year will be $75.

Please find NPV for the following? To keep or to buy new truck?