Answer Happy

A truck was purchased four years ago for $56,000 to move raw materials and finished goods between a production facility and four remote warehouses. This truck (the defender) can be sold at the present time for $38,000 and replaced by a new truck (the challenger) with a purchase price of $75,000. a. Given the MVs and operating and maintenance costs, what is the economic life of the challenger if MARR = 10% ? Note: This is a before-tax analysis that does not require any calculations involving the defender. b. Suppose that the defender was set up on a depreciation schedule with a five-year MACRS class life at the time of its purchase (four years ago). The corresponding depreciation rates are 20%, 32%, 19.2%, 11.52 %, 11.52% and 5.76%. The tax rate is 25%. The defender can be sold now for $38,000, or a rebuilt engine and transmission can be purchased and installed at a cost of $12,000 (capital investment with three-year depreciable life, straight line, salvage value = 0). If the defender is kept in service, assume that it will have operating and maintenance costs as shown in Part (a) and a MV of $0 at the end of four years. Determine the ATCFs for the defender.

EOY 1 AWN 3 4 Defender Market O&M Costs value $28,000 $8,500 19,000 11,500 12,500 13,500 5,000 17,500 Challenger EOY Market value 1 234 $56,000 45,000 34,500 24,500 O&M Costs $5,500 6,900 7,700 10,000

N 12345 67799 10 11 12 13 14 15 16 17 18 19 20 21 22283745 30 40 50 Single Payment Compound Amount Present Factor To Find F Given P F/P 1.1000 1.2100 1.3310 1.4641 1.6105 Discrete Compounding; i = 10% Compound Amount Factor 1.7716 1.9487 2.1436 2.3579 2.5937 2.8531 3.1384 3.4523 3.7975 4.1772 4.5950 5.0545 5.5599 6.1159 6.7275 7.4002 8.1403 8.9543 9.8497 10.8347 17.4494 28.1024 45.2593 72.8905 117.3909 Worth Factor To Find P Given F P/F 0.9091 0.8264 0.7513 0.6830 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 0.3505 0.3186 0.2897 0.2633 0.2394 0.2176 0.1978 0.1799 0.1635 0.1486 0.1351 0.1228 0.1117 0.1015 0.0923 0.0573 0.0356 0.0221 0.0137 0.0085 To Find F Given A F/A 1.0000 2.1000 3.3100 4.6410 6.1051 7.7156 9.4872 11.4359 13.5795 15.9374 18.5312 21.3843 24.5227 27.9750 31.7725 35.9497 40.5447 45.5992 51.1591 57.2750 64.0025 71.4027 79.5430 88.4973 98.3471 164.4940 271.0244 442.5926 718.9048 1163.9085 Uniform Series Present Worth Factor To Find P Given A P/A 0.9091 1.7355 2.4869 3.1699 3.7908 4.3553 4.8684 5.3349 5.7590 6.1446 6.4951 6.8137 7.1034 7.3667 7.6061 7.8237 8.0216 8.2014 8.3649 8.5136 8.6487 8.7715 8.8832 8.9847 9.0770 9.4269 9.6442 9.7791 9.8628 9.9148 Sinking Fund Factor To Find A Given F A/F 1.0000 0.4762 0.3021 0.2155 0.1638 0.1296 0.1054 0.0874 0.0736 0.0627 0.0540 0.0468 0.0408 0.0357 0.0315 0.0278 0.0247 0.0219 0.0195 0.0175 0.0156 0.0140 0.0126 0.0113 0.0102 0.0061 0.0037 0.0023 0.0014 0.0009 Capital Recovery Factor To Find A Given P A/P 1.1000 0.5762 0.4021 0.3155 0.2638 0.2296 0.2054 0.1874 0.1736 0.1627 0.1540 0.1468 0.1408 0.1357 0.1315 0.1278 0.1247 0.1219 0.1195 0.1175 0.1156 0.1140 0.1126 0.1113 0.1102 0.1061 0.1037 0.1023 0.1014 0.1009