An independent trucker is trying to decide whether to buy a 15-tonne or 25-tonne truck. A 15-tonne truck would cost $150,000; it would have a service life of seven years and a trade-in value of about $30,000 at seven years of age. A 25-tonne truck would cost $200,000, and would have a service life of six years and be worth about $40,000 at six years of age. The estimated annual profit (after provision for a normal salary for the driver-owner) would be $35,000 for the smaller truck and $48,000 for the larger truck. Which truck should be purchased if the cost of financing a truck is 9% compounded annually? What is the average annual economic benefit of making the right decision?

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The Answer of An independent trucker is trying to decide whether to buy a 15-tonne or 25-tonne truck. A 15-tonne truck would cost $150,000; it would have a service life of seven years and a trade-in value of about $30,000 at seven years of age. A 25-tonne truck would cost $200,000, and would have a service life of six years and be worth about $40,000 at six years of age. The estimated annual profit (after provision for a normal salary for the driver-owner) would be $35,000 for the smaller truck and $48,000 for the larger truck. Which truck should be purchased if the cost of financing a truck is 9% compounded annually? What is the average annual economic benefit of making the right decision?

An Independent Trucker Is Trying to Decide Whether to Buy