Suppose the costs also benefits incur at the end of the year

Reference no: EM1330433

Cost Benefit Analysis

A city has learned that by buying garbage trucks, labor costs for garbage removal would be reduced. You, the analyst, have also collected the following information:

Cost of the trucks today is $400,000
Annual savings in this year's constant dollars is $90,000
Trucks will last for four years, then will be sold for $100,000
The city can borrow money (discount rate) at 7 percent
Inflation (for the next four years) is expected to average 3 percent

All the dollar amounts are in this year's dollars (constant dollars)

Assuming the costs and benefits incur at the end of the year, should the city buy the trucks.

Reference no: EM1330433

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