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You are working for a shipping company and consider buying a new truck. The pr...
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You are working for a shipping company and consider buying a new truck. The price of the truck is EUR 44,000. Maintenance cost are EUR 739 per year. Annual Fuel cost are estimated to be EUR 1,532 and the insurance premium for the truck will be EUR 134 per year. The truck is going to be used for the next 5 years. You are unsure about the revenue prospects and have identified two scenarios.
| Scenario | t=1 | t=2 | t=3 | t=4 | t=5 |
|---|---|---|---|---|---|
| Good | 20,000 | 21,000 | 20,000 | 19,000 | 15,000 |
| Bad | 13,000 | 12,000 | 10,000 | 10,000 | 11,000 |
The chance for the good scenario to realize is 50%. What are the expected cash flows of the truck over the next 5 years?
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