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Due to expanded growth in a certain portion of the city, a new waste truck capacity is needed

Economics

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Due to expanded growth in a certain portion of the city, a new waste truck capacity is needed. An additional truck can be purchased now to replace the presently owned assets. The city uses a 5% interest rate for project evaluation. It is economically viable to buy the new waste truck?

New Model

Present value $72,000

Annual cost 12,500

Annual savings 31,000

Salvage value 7,200

Life in years 10

a)   PW = 191,097.03

b)    PW = -326,256.87

c)   PW = 70,851.45

d)   PW = $75,271.53