Neglecting calculations for depreciation or trade-in-value

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Reference no: EM13634769

You bought a truck three years ago for $150,000. You took out a 5 year loan at 4% and you assumed the salvage value at the end of 10 years would be $25,000. The yearly operating operating costs for fuel, maintenance, licensing, etc. is $76,000.

Today, you have the opportunity to buy a new truck for $160,000 using another 5 year loan at 4.5%, and assuming the salvage value 7 years from now would be $55,000. The new truck gets much better gas mileage and the operating costs would be only $66,000 per year.

Neglecting calculations for depreciation or trade-in-value, should you drive the truck you have for another 7 years, or buy the new truck? Assume your company MARR = 12%.

Reference no: EM13634769

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