The president of Rollway Transport received a letter from one of his major customers indicating at the customer was interested in changing the transportation arrangements for his product in coming year. The product was a fine glassware that was transported to several locations th out the province. The customer felt that the cost of transportation was becoming high relative to the desired selling price for the product. Currently, Rollway carries 3,000 loads of the product a year at a contract price of $810 per load. This contract had been held by Rollway for ral years and there had been few complaints from the customer. Due to the fragile natureo he product and the handling of it at distribution points, Rollway was required to carry special break age insurance on the loads. In the past several years, the premiums had exceeded $50,000 per year for this product alone. The management accountant had determined that the specialized handling of the glassware at the warehouses costs Rollway $675,000 per year in labour and materials. The customer stated that his company had developed a over 50% more units of the product per load. In terms of the current volumes, the customer new carrier that had the potential to carry pected that Rollway would only have to carry 1,800 loads per year. He also reported that th reakage factor was reduced to almost zero. As such ould save money on the insurance coverage for the product. Since ex tests on the carrier showed that the b omer felt that Rollway w rried in a specialized container in the new carrier, conventional handling s rather than the techniques such as those used for regular cargo could be used on the container cialized handling that had been previously required. Unfortunately, the carriers were gned specifically for the customer's product and as such were not suitable for carrying the products of other customers The customer proposed that Rollway consider the possibility of purchasing 50 of these new carriers at a cost of $65,000 each. The units were expected to have a useful life of at least 12 years. If Rollway did acquire the units, the customer was prepared to enter into a five year contract with Rollway to transport a volume of glassware no smaller than the current level for each year. The customer indicated that the Transportation Ministry, which regulates tariffs, cated that Rollway could charge up to $1,228 per load if it used its own equipment. The new carriers would require the construction of special ramps at each of the distribution points used by Rollway. It was estimated that the ramps could be built at a total cost of $146,000 From the tone of the letter, the president got the feeling that the customer was very strongly committed to this new carrier. He wondered if the customer might be considering whether to buy the equipment himself. If so, could Rollway simply provide the drivers and the warehousing facilities? A phone call to the Ministry of Transportation indicated that Rollway could charge up to $560 per load if they used the customer's carriers rather than their own Currently, Rollway expected at least a 10% return after taxes on capital investment projects With a tax rate of 46%, the president felt that any project would have to be very sound in order r the company to consider accepting it. Alternatively, if the customer were to buy the equipment, the president was very sure that the tax rate and the cost of borrowing for the customer would be essentially the same as for Rollway. The controller for Rollway informed the president that the allowable CCA rate for the new equipment would be 30% annually, while the CCA rate for the ramps wo uld be 6% annually. Given the nature of the transportation business