B.1. A contractor asks your advice on the purchase of a new dump truck that is available for
$40,000. You estimate that the net profit earned by the truck the first year will be $10,000.
However, with increasing maintenance and repair costs, and decreasing productivity you es-
timate that the net profit will decline by $600 per year each year. Thus you estimate $9,400
the second year, $8,800 the third, and so on. The contractor expects to keep the truck for
10 years and sell it for $5,000 at the end of the tenth year. Estimate the rate of return for
the contractor. (Hint: Try 15%.)
(Ans. i 16.0%)