The Euro Transport company wants to purchase a new truck. The truck would cost $225,000 and its salvage value would be 10% at the end of its 20-year useful life. The annual estimated revenues and costs associated with the new truck are given below:
Required:
- Compute payback period of the truck. Is the investment in new truck desirable if maximum desired payback period of the Euro Transport company is 5 years?
- Compute the accounting rate of return promised by the truck. Would the Euro Transport company be interested in new truck if minimum required accounting rate of return is 12%?
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