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Your company is looking at purchasing a new dump truck for $70,000

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Your company is looking at purchasing a new dump truck
for $70,000. The dump truck has an hourly operation cost
(including operator) of $45.00 per hour and a useful life of
five years. At the end of five years the truck has a salvage
value of $10,000. Using revenue of $60.00 per hour, 1200
billable hours per year, and a MARR of 15%, calculate the
net present value for the dump truck. Should your company
purchase the dump truck? Why? What is the annual
equivalent for the dump truck? What is the capital recovery
with return for the dump truck?What is the payback period
without interest for the dump truck?
Solution
Given
The company should purchases the dump truck as the net
present value is possitive.
Annual Equivalent = NPV / present value of annuity factor(
from present value of annuity factor table )
= 339 / 3.3522 = 101.07
Capital Recovery = (Initial investment x Present Capital
recovery factor) + (Salvage Value x future Capital recovery
factor)
Present Capital recovery factor can be calculated with the
following formula = P/CRF = (r x (1+r)n )/ (1+r)n - 1

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Your company is looking at purchasing a new dump truck for $70,000. The dump truck has an hourly operation cost (including operator) of $45.00 per hour and a useful life of five years. At the end of five years the truck has a salvage value of $10,000. Using revenue of $60.00 per hour, 1200 billable hours per year, and a MARR of 15%, calculate the net present value for the dump truck. Should your company purchase the dump truck? Why? What is the annual equivalent for the dump truck? What is the capital recovery with return for the dump truck?What is the payback period without interest for the d ...
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