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An engineering firm is considering purchasing a fleet of cars for their employees’ field work rather...

An engineering firm is considering purchasing a fleet of cars for their employees’ field work rather than the current practice of paying employees $0.40 /km for the use of their own cars. If the cars were purchased for $30,000, used for 3 years then sold for $12,000, insurance was $900/year (prepaid at the beginning of the year), the O&M costs were $0.25/km, the interest rate was 5%/year, and the average travel per year was 25,000 km, what is the equivalent cost per kilometer?

Would it be good idea to pursue the fleet purchase?

How many kilometers would have to be driven per year so that the company is indifferent between the options?

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jeff jeffy answered 2 years ago
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