Explore BrainMass
Share

Explore BrainMass

    Cost Benefit Analysis

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    A city has learned that by buying garbage trucks, labor costs for garbage removal would be reduced. You, the analyst, have also collected the following information:

    Cost of the trucks today is $400,000
    Annual savings in this year's constant dollars is $90,000
    Trucks will last for four years, then will be sold for $100,000
    The city can borrow money (discount rate) at 7 percent
    Inflation (for the next four years) is expected to average 3 percent

    All the dollar amounts are in this year's dollars (constant dollars)

    Assuming the costs and benefits incur at the end of the year, should the city buy the trucks.

    © BrainMass Inc. brainmass.com October 10, 2019, 4:22 am ad1c9bdddf
    https://brainmass.com/economics/cost-benefit-analysis/cost-benefit-analysis-457913

    Solution Preview

    This problem is related to capital budgeting Capital budgeting involves taking decision about long term mix of the composition of assets of the business. As per Zen Wealth, " Capital Budgeting is the process by which the firm decides which long-term investments to make. Capital Budgeting projects, i.e., potential long-term investments, ...

    Solution Summary

    Solution assists in Cost Benefit Analysis

    $2.19