Question
The US. Army must replace its Heel of cargo trucks. Three designs are under consideration. All designs provide the same level of service. We describe below the cost of a single truck with 2.5 Ions of capacity. Which truck should the army select if it uses an interest rate of 10% for economic decision
Design A: Using modern materials, a truck can be constructed that lasts forever. The initial cost of the truck is SI50.000. The annual operating and maintenance cost is $6,000.
Design B Using current technology and a design similar to the old trucks, the Army can buy a new truck for an initial cost of S50.000. The truck lasts for 10 years and has an annual operating cost is $10,000. It has no salvage value after 10 years.
Design C: Using new technology and a new design, the truck has an initial cost of $70,000. The truck lasts for 12 years with an annual operating cost of $6,000. It must be rebuilt at a cost of $20,000 after six years. It has no salvage value at the end of its life.