Walt Wallace Construction Enterprises is investigating the purchase of a new dump truck. Interest is...

Question

Walt Wallace Construction Enterprises is investigating the purchase of a new dump truck. Interest is 9%. The cash flows for two Likely models are as follows
Annual
FirstOperatingAnnualSalvage
ModelCostCost incomeValueLife
A$50,000$2000$9,000 $10,00010 yr
B$80,000$1000$12,000 $30,00010 yr
(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?

Robert · Accepted Answer

B) It doesn't matter if model B is unavailable. You shouldn't buy that one anyway. Buy bulldozer 
A

Walt Wallace Construction Enterprises is investigating the purchase of a new dump truck. Interest is 9%. The cash flows for two Likely models are as follows Annual FirstOperatingAnnualSalvage...

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