Question

A forwarding agent is considering which of two delivery trucks to purchase. The French model will cost $80 000, will have expenses (including depreciation) of $250 000 per year, and a useful life of three years. The Japanese model will cost $100 000, will have expenses (including depreciation) of $240 000, and useful life of four years. Four-year straight-line depreciation is used for either truck, the French truck can be sold after three years for $15 000, the Japanese one after four years for $12 000. Assuming 21 % tax rate, which model should be purchased?

Answer 1