Homework Answers
| Calculation of total relevant costs is shown below | ||||
| Keep old | Replace with new | |||
| Additional fuel costs (6600*5) | $33,000 | |||
| Cash outflow today (25000-18000) | $7,000 | |||
| The relevant cash outflow under replacing with new truck is lower than keeping old. | ||||
| Thus, company should replace with the old truck with new. This would give cash savings of $26,000 ($33,000-$7,000) | ||||
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