Salespeople with firm-owned cars

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A firm must decide whether to provide their salespeople with firm-owned cars or to pay a mileage allowance for their own cars. New cars would cost about $28,000 each and could be resold 4 years later for about $11,000 each. Annual operating costs would be $1200 per year plus 24c per mile. If the salespeople drove their own cars, the firm would pay 50c per mile. How many miles must each salesperson drive each year for it to be economically practical for the firm to provide the cars? Assume a 10% annual interest rate. Use an annual cash flow analysis.

Reference no: EM131806601

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