The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4Runners for company principals. The purchase price for the Ford Explorer will be $30,750. Annual maintenance costs for the Explorer are expected to be $575 per year more than that of the 4Runner. The purchase price for Toyota 4Runners is 35,250 The trade-in values after 3 years are estimated to be 50% of the first cost for the Explorer and 60% for the 4Runner. (a) What is the incremental ROR between the two vehicles? (b) Provided the firm’s MARR is 15% per year, which vehicle should it buy?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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The CFO of a consulting engineering firm is deciding between purchasing Ford Explorers and Toyota 4Runners for company principals. The purchase price for the Ford Explorer will be $30,750. Annual maintenance costs for the Explorer are expected to be $575 per year more than that of the 4Runner. The purchase price for Toyota 4Runners is 35,250 The trade-in values after 3 years are estimated to be 50% of the first cost for the Explorer and 60% for the 4Runner. (a) What is the incremental ROR between the two vehicles? (b) Provided the firm’s MARR is 15% per year, which vehicle should it buy?

 

 

a) The incremental ROR between the two vehicles is
%.
b) The firm should buy (Click to select) vas the incremental ROR is greater than
v the MARR.
Transcribed Image Text:a) The incremental ROR between the two vehicles is %. b) The firm should buy (Click to select) vas the incremental ROR is greater than v the MARR.
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