You are considering purchasing a dump truck. The truck will cost $55,000 and have an operating and

Question:

You are considering purchasing a dump truck. The truck will cost $55,000 and have an operating and maintenance cost that starts at $18,000 the first year and increases by $2,000 per year. Assume that the at the end of five years is $12,000 and interest rate is 12%. What is the equivalent annual cost of owning and operating the truck?
Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...