A transportation company has bought a truck 5 years ago for $60 000. Currently its market value is Maintenance costs of the truck are per year, increasing by $500 with each year. A new truck of the same capacity costs with constant maintenance costs of $500 for the duration of its service life of 10 years. Assuming 10% depreciation rate for both trucks and 5% annual interest rate, should the company buy the new truck now?

Question

A transportation company has bought a truck 5 years ago for $60 000. Currently its market value is  Maintenance costs of the truck are  per year, increasing by $500 with each year. A new truck of the same capacity costs  with constant maintenance costs of $500 for the duration of its service life of 10 years. Assuming 10% depreciation rate for both trucks and 5% annual interest rate, should the company buy the new truck now?

Quizplus · Accepted Answer

The Answer of A transportation company has bought a truck 5 years ago for $60 000. Currently its market value is  Maintenance costs of the truck are  per year, increasing by $500 with each year. A new truck of the same capacity costs  with constant maintenance costs of $500 for the duration of its service life of 10 years. Assuming 10% depreciation rate for both trucks and 5% annual interest rate, should the company buy the new truck now?

A Transportation Company Has Bought a Truck 5 Years Ago