Question

Read the assignment and answer the questions. You must also upload your Excel file, Word document or pdf showing your work. Bodacious Building Co. is considering four different acquisition methods for obtaining pickup trucks. If the contractor’s MARR is 6%, which alternative do you recommend? The alternatives are: Immediate cash purchase of the trucks for $22,500 each, and after five years sell each truck for an estimated $4,900. Lease the trucks for five years for $4,000 per year paid at the end of each year; the lease agreement includes a down payment of $3,900 due immediately. The contractor pays all operating and maintenance costs for the trucks, and the leasing company retains ownership. Purchase the trucks using an installment plan requiring an immediate down payment of $6,000 and $5,200 per year at the end of each year for four years. Assume the trucks will be sold after five years for $4,900 each. Lease the trucks for five years, paying $4,100 at the beginning of each year (6 payments). Which alternative do you recommend? What is your calculated NPV for alternative A? What is your calculated NPV for alternative B? What is your calculated NPV for alternative C? What is your calculated NPV for alternative D?

Answer 1

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