A consulting engineering firm is trying to
decide whether it should purchase Ford
Explorers or Toyota 4Runners for company
principals. The models under consideration
would cost $29,000 for the Ford
and $32,000 for the Toyota. The annual
operating cost of the Explorer is expected
to be $200 per year less than that of the
4Runner. The trade-in values after 3 years
are estimated to be 50% of first cost for the
Explorer and 60% for the Toyota. (a) What
is the rate of return relative to that of Ford,
if the Toyota is selected? (b) If the firm's
MARR is ] 8% per year, which make of
vehicle should it buy?