A heavy equipment rental company uses a high interest rate of 30% for the rental of a specialty heavy haul dump truck.
The net annual profit for this investment is most nearly:
Total annual income : $55,000
Capital cost : $80,000
Annual operating cost : $28,600
Lifespan : 6 years
Solution:
Calculate the annual capital recovery with return:
$80,000 (A/P, 30%, 6yrs) = $30,272
Calculate the net annual profit:
55,000 - (30,272 + 28,600) = - $3,872 (net loss)