Calculate the breakeven annual mileage for the two vans

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Reference no: EM13203837

A company is considering its fleet of delivery vans. Two options are available, both concerning the same vehicle. It can buy a gasoline or diesel powered model. Both vehicles have a salvage value of %5,000 after five years of use. The diesel powered van costs $39,000 and the gasoline powered one $34,000. They have fuel economies of 11mpg and 7mpg respectively. Gasoline is expected to have an average price of $2.25 per gallon, diesel $2.35 per gallon. The company uses 17.5% for MARR.

Calculate the breakeven annual mileage for the two vans.

If the company plans to run the vans for an average annual mileage of 90,000 miles, what is the incremental rate of return for the diesel compared to the gasoline model?

Reference no: EM13203837

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