Question I. a) A Construction Company has just purchased a fleet of five truck to be used for delivery in a particular city. Initial cost was $3000 per truck and the expected life and salvage value is 12 years and $700 respectively. The combine insurance, maintenance, gas and lubrication cost are expected to be $1000 for the first year and to increase by $100 per year thereafter, while delivery service will bring an extra $3000 (revenue) in every 2 years for the company. If the interest is 12% per year find the total cost of this investment.

Question I. a) A Construction Company has just purchased a fleet of five truck to be used for delivery in a particular city. Initial cost was $3000 per truck and the expected life and salvage value is 12 years and $700 respectively. The combine insurance, maintenance, gas and lubrication cost are expected to be $1000 for the first year and to increase by $100 per year thereafter, while delivery service will bring an extra $3000 (revenue) in every 2 years for the company. If the interest is 12% per year find the total cost of this investment.

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter11: Capital Budgeting And Risk

Section: Chapter Questions

Problem 15P

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A Construction Company has just purchased a fleet of five truck to be used for deliveryin a particular city. Initial cost was $3000 per truck and the expected life and salvagevalue is 12 years and $700 respectively. The combine insurance, maintenance, gas andlubrication cost are expected to be $1000 for the first year and to increase by $100 peryear thereafter, while delivery service will bring an extra $3000 (revenue) in every 2years for the company. If the interest is 12% per year find the total cost of this investment.
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