What is the equivalent cost per mile for the new company

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Reference no: EM131068307

A company’s technicians do many service calls to their customers’ sites and have been using their own cars, for which the company reimburses them at a rate of $0.56 per mile. A technician travels an average of 35,000 miles per year. The company is analyzing a proposal to provide the field technicians with company cars. The expenses per car would involve $27,000 new car purchase price, three year service life, salvage value of $9,000, yearly taxes & insurance $1,300, and $0.28 operating & maintenance costs per mile.

a) If the interest rate is 8%, what is the equivalent cost per mile for the new company cars option?

b) What should the company decide (continue using personal cars or purchase company cars)? Justify your answer.

Please show all work

Reference no: EM131068307

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