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Walt Wallace Construction Enterprises may buy a new dump truck with a 10-year life. Interest is 6%. The cash flows for two likely models are
Walt Wallace Construction Enterprises may buy a new dump truck with a 10-year life. Interest is 6%. The cash flows for two likely models are as follows: Model First Cost Annual Operating Cost Annual Income Salvage Value A $65,000 $8,000 $16,000 $25,000 B 59,000 10,000 17,500 19,000 (a) Using present worth analysis, which truck should the firm buy, and why? (b) Before the construction company can close the deal, the dealer sells out of Model B and cannot get any more. What should the firm do now, and why?
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