2. Accounting
3. a waste disposal company is considering the replacement of one...

# Question: a waste disposal company is considering the replacement of one...

###### Question details
 A waste disposal company is considering the replacement of one of its aging trucks. The key parameters of the three trucks under scrutiny are provided below. Parameters Delta Epsilon Zeta 1. Initial Cost ($) 250,000 375,000 450,000 2. Revenues ($) 230,000 at EOY1 increasing by 2.5% annually thereafter 195,000 at EOY1 increasing by 3,000 annually thereafter 235,000 at EOY1 decreasing by 1% annually thereafter 3. Operating costs ($) 140,000 at EOY1 decreasing by 2,000 annually thereafter 125,000 at EOY1 decreasing by 2% annually thereafter EOY1-EOY4 = 125,000; EOY5-EOY8 = 135,000 EOY9-EOY12 = 170,000 EOY13-EOY16 = 190,000 4. End-of-life salvage value ($) -20,000 7,000 -20,000 5. Useful life (years) 4 8 16 EOY = End-of-year Industry Standard = 4 years MARR = 10%
1. 25. The incremental External Rate of Return (ΔERR) between the Epsilon and Zeta trucks (first decimal; no rounding) is

a) 10.4%; b) 10.6%; c) 10.8%; d) 11.3%.

1. 26. From your calculations, the best truck based on the external rate of return (ERR) method is
a) Delta; b) Epsilon; c) Zeta.
1. 27. If the company’s truck budget is $850,000, which truck(s) should it purchase assuming that trucks are independent investments? a) Zeta only; b) Delta and Epsilon; c) Delta and Zeta; d) Epsilon and Zeta. 1. 28. Donald plans to make$200 bank deposits at the end of every other month in 2019 (i.e., end of February, end of April, end of June … end of December).

What is the equivalent monthly (end of each month of12 months) deposit if the interest rate is 12% compounded monthly?

a) 200(A/F,12%/12,2)
b) 200/2
c) 200(A/P,12%/12,2)
d) 200(6)(A/F,12%,12)

Hint: Delta's NFW = $81,900 Epsilon's NPW =$89,000

Zeta's NFW = \$709,100