CPM Construction plans to buy a truck for 150000 and sell it for 15000 at the end of five years. The annual operating cost of the vehicle is 60000. What is the equivalent annual cost of this truck, if the company uses a MARR of 12%
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Step 1
- Initial cost of the truck (C) = $150,000 - Salvage value (S) = $15,000 - MARR (i) = 12% or 0.12 - Number of years (n) = 5 The present worth of the salvage value can be calculated using the formula: \[ PW(S) = \frac{S}{(1 + i)^n} \] Calculating the present Show more…
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