Relevant cash flows , Financial Accounting

The City of Miami must replace a number of its concrete mixer trucks with new trucks. It has received two bids and has evaluated closely the performance characteristics of the several trucks. The truck A, which costs $ 78,000, is top-of-the-line equipment. The truck has a life of eight years, suppose that the engine is rebuilt in the fifth year. Maintenance costs of $4,000 a year are expected in the first four years, followed by total maintenance and rebuilding costs of $15,000 in the fifth year. During the last three years, maintenance costs are expected to be $6,000 a year. At the end of eight years the truck will have an estimated scrap value of $12,000.

The trucks B cost $65,000 a truck. Maintenance costs for the truck will be higher. In the first year they are expected to be $2,000, and this amount is expected to increase by $1,000 a year by the eighth year. In the fourth year the engine will require to be rebuilt, and this will cost the company $10,000 in addition to maintenance costs in that year. At the end of eight years the truck will have an estimated scrap value of $7,000.
a)    What are the relevant cash flows related to the trucks?
b)    If the City of Miami's opportunity cost of funds is 8%, which truck should it accept? Ignore tax considerations, Due to the city pays no taxes.
c)    If its opportunity cost were 15% would your answer change?

Posted Date: 3/15/2013 3:58:46 AM | Location : United States







Related Discussions:- Relevant cash flows , Assignment Help, Ask Question on Relevant cash flows , Get Answer, Expert's Help, Relevant cash flows Discussions

Write discussion on Relevant cash flows
Your posts are moderated
Related Questions
I am needing homework help on my Principles to Accounting 1, but don''t know how much you guys charge

IF I HAVE A LOAN AND ACCRUED INTEREST .THEN ACCRUED INTEREST GOES ON WHICH SIDE- DEBIT OR CREDIT ?

Firm Value: Old School Corporation expects an EBIT of $9,000 every year forever. Old School currently has no debt, and its cost of equity is 18 percent. The firm can borrow at

Instructions: The case should be done in your assigned groups. Hand in a brief write-up not exceeding two pages explaining what was done.   In April 198

Craig's Cars has assets of $4,550 and stockholders' equity of $3,200. What is the amount of liabilities? What is the amount of claims?

Data for 2013 were as follows: PBO, January 1, $244,000 and December 31, $274,000; pension plan assets (fair value) January 1, $190,000, and December 31, $233,000. The projected be

From the end of January to the end of December 2010, the XYZ Company experienced the following changes in its assets and liabilities of interest: the company achieved a saving posi

Q. Corporate Enterprise group? In order to have better and systematic participation of labour in management for improvement in working of Railway system and appropriate changes

Q. A prior period adjustment that corrects income of a prior period requires that an entry be made to a. an income statement account. b. a current year revenue or expense account.

On November 1, 2011, Leetch Ltd. borrows $400,000 cash from a bank by signing a five-year installment note bearing 8% interest. The note needs equal total payments every year on Oc