The two alternatives are equally costly

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Reference no: EM131608999

A pipeline contractor can purchase a needed truck for $43,000. Its estimated life is 6 years, and it has no salvage value. Maintenance is estimated to be $1,800 per year. Operating expense is $60 per day. The contractor can hire a similar unit for $170 per day. MARR is 7%.

(a) How many days per year must the truck’s services be needed such that the two alternatives are equally costly?

(b) If the truck is needed for 180 days/year, should the contractor buy the truck or hire the similar unit?

(c) Determine the dollar amount of annual savings generated by using the preferred alternative rather than the nonpreferred.

Reference no: EM131608999

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