Volvo truck can be acquired for $40,00 today and is expected to have a life of four years with savings of $115,000 each year. A $5,000 maintenance package is expected to be purchased at the begigging of year three, and the machine can be sold for $10,000 after four years.

- A freightliner truck retails for $37,000 and is forecast to save $13,000 in labour and materials each year. A $2,000 maintenance procedure is needed at the beginning of both years three and four. The salvage value of the machine is estimated at $5,750. The cost of capital is 12%.

- What is the Present Value of each brand?

Volvo _____ Freightlener _______

Which brand should you purchase?

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