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Munoz Freight Company owns a truck that cost $40,000. Currently, the truck’s book value is $29,000,...

Munoz Freight Company owns a truck that cost $40,000. Currently, the truck’s book value is $29,000, and its expected remaining useful life is five years. Munoz has the opportunity to purchase for $24,000 a replacement truck that is extremely fuel efficient. Fuel cost for the old truck is expected to be $6,800 per year more than fuel cost for the new truck. The old truck is paid for but, in spite of being in good condition, can be sold for only $18,000.

Required
Calculate the total relevant costs to keep the old truck or by the new. Should Munoz replace the old truck with the new fuel-efficient model, or should it continue to use the old truck until it wears out?

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