Your company operates a fleet of light trucks that are used to provide contract delivery services. As the
engineering and technical manager you are analyzing the purchase of 55 new trucks as an addition to the fleet. These
trucks would be used for a new contract the sales staff is trying to obtain. If purchased the trucks would cost $21200
each; estimated use is 20000 miles per year per truck; estimated operation and maintenance and other related expenses
(year-zero dollars) are $0.45 per mile which is forecasted to increase at the rate of 5% per year; and the trucks are
MACRS (GDS) three-year property class assets. The analysis period is four years; t = 38%; MARR = 15% per year (after taxes;
includes an inflation component); and the estimated MV at the end of four years (in year-zero dollars) is 35% of the
purchase price of the vehicles. This estimate is expected to increase at the rate of 2% per year.
Based on an after-tax actual-dollar analysis what is the annual revenue required by your company from the contract to
justify these between purchasing the trucks and which other alternative? expenditures before any profit is considered? This calculated amount for
annual revenue is the breakeven point between purchasing the trucks and which other alternative?