Should the company replace truck

Response to the following problem:

Brett Company is considering replacing one of its delivery trucks. The truck in question was purchased two years ago at a cost of $47,000. At the time of purchase the truck was expected to have $5,000 salvage value at the end of its six-year life. Given the use of the straight-line depreciation, the truck has a current book value of $33,000. If sold today, the company could get $25,000 for the truck. It costs $28,000 per year to operate the existing truck. The new truck would cost $50,000 and would cost only $22,000 per year to operate. The new truck would be depreciated on a straight-line basis over its four-year useful life to its expected salvage value of $7,500. The company's required rate of return is 14%. Ignore income taxes.

Should Brett company replace the truck? why or why not?

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Cost Accounting: Should the company replace truck
Reference No:- TGS02085700

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