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The Mega Bucks Trucking Company needs to replace a truck that was involved in an accident. The company is facing three different options: Year Truck
The Mega Bucks Trucking Company needs to replace a truck that was involved in an accident. The company is facing three different options:
Year | Truck A | Truck B | Truck C |
0 | -$30,000 | -$42,000 | -$40,000 |
1 | -1,500 | -1,000 | -2,160 |
2 | -1,500 | -1,000 | -1,560 |
3 | -2,000 | -600 | -1,000 |
4 | -4,000 | -600 | -1,000 |
5 | -5,000 | -600 |
|
6 | -6,000 | -500 |
|
7 |
| -500 |
|
If the company is currently facing a cost of capital of 15%, which truck should it purchase (using either the replacement chain or annual annuity equivalent approach)?
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