Problem:
A state's department of transportation (DOT) is considering whether to buy or lease an RFID tracking system for asphalt, concrete, and gravel trucks to be used in road paving. Purchasing the RFID system will cost $5000 per truck, with a salvage value of $1500 after the RFID system's useful life of 5-years. However, the DOT considering this purchase is also looking at leasing the same RFID system for an annual payment of $3500, which includes a full replacement warranty. Assuming that the MARR is 11% and on the basis of an internal rate of return analysis.
Required:
Which alternative would you advise the DOT to consider? Analyze incrementally using rate of return.
The number of trucks used in a season varies from 5,000 to 7,500. Does it matter? Provide thorough explanation of the given question.