Question

your company is trying to decide between two alternatives,truck a is relatively cheap truck cost $100000 and has 6 years life during wich it will produce anannual cash flow of $150000.truck b is much more expensive it cost $250000and has only a 3 year life after wich it has to be replaced.however truck b is much more efficent than truck A.and during each of 3 years of its life it produce a cash flow of $300000 and company cash flow is 12%.calculate AEA and wich truck is better

Answer 1

the answer is a. because $150000 is already enough and if there are problems with the truck you can fix it with the money the truck makes so pick truck a.