Solomon Freight Company owns a truck that cost $39,000. Currently, the truck's book value is $24,000, and its expected remaining useful life is four years. Solomon has the opportunity to purchase for $28,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,800 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $19,000. Required Calculate the total relevant costs. Should Solomon replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out?

Solomon Freight Company owns a truck that cost $39,000. Currently, the truck's book value is $24,000, and its expected remaining useful life is four years. Solomon has the opportunity to purchase for $28,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $5,800 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $19,000. Required Calculate the total relevant costs. Should Solomon replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 13P

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