Total decided to purchase new trucks to replace three outdated trucks. The new truck will cost $ 200,000 and the discount rate is 10%, it is expected to last for ten years, after which it is expected to achieve a scrap value of $ 25,000.

Additional parts for the new truck will cost an additional $ 28,000 is one time. A maintenance contract will be entered into for the new truck at a cost of $ 15,000 annually. Maintenance of the allocated additional parts will be performed internally at an estimated cost of $ 3,000 per year. New machine. A mechanical engineer will be hired for $ 20,500 per year.

Expected benefits of the new truck: The truck will include scrap value for old machinery, which is expected to be $ 6,000 each. Three vintage truck drivers' wages of $ 15,000 per year per employee, plus a maintenance vehicle cost of $ 18,000 per year for all, can also be seen as an advantage. You should also achieve additional savings of $ 10,000 annually in reduced scrap / rework costs.

Evaluate and calculate the proposed new investment using the payback and NPV methods