Question

A waste disposal company is considering the replacement of one of its aging trucks. The key parameters of the three trucks under scrutiny are rovided below. Parameters Delta Epsilon 375,000 195,000 at EOY1 Zeta 1. Initial Cost 250,000 450,000 230,000 at EOY1 235,000 at EOY1 decreasing by 1% 2. Revenues ncreasing by3,000 annuallyannually thereafter increasing by 2.5% annually thereafter 140,000 at EOY1 thereafter 125,000 at EOY1 OY1-EOY4- 125,000; 3. Operating decreasing by 1 200 annually decreasing by EOY5-EOY8 135,000 costs 2,000 annually thereafter |EOY9-EOY12:170,000 EOY13-EOY16 190,000 thereafter 4. End-of-life salvage value ($ -20,000 7,000 -20,000 5. Useful life 4 16 ears EOY End-of-year Industry Standard - 4 years MARR-10% . . 21. From your calculations, the best truck based on the internal rate of return (IRR) method is a) Delta; b) Epsilon, c) Zeta 22. Delta's External Rate of Return (ERR) (first decimal; no rounding) is 23. Zeta's External Rate of Return (ERR) (first decimal; no rounding) is 24. The incremental External Rate of Return (AERR) between the Delta and a) 14.9%; b) 15.3% c) 15.5% d) 16.1% a) 11.7%; b) 12.0.96, c) 12.7%; d) 12.9% Zeta trucks (first decimal; no rounding) is a) 10.0% b) 10.3%; c) 10.6%; d) 11.0%

Economics practice questions (please show your work and the answer could always be a 'none of the above' answer in addition to the options given)

Answer 1