UPS Freight plans to spend $100 million on new long-haul tractor-trailers. Some of these vehicles will include a new shelving design with adjustable shelves to transport irregularly sized freight that requires special handling during loading and unloading. Though the life is relatively short, the director ants a capitalized cost analysis performed on the two final designs. Compare the alternatives at the MARR of 10% per year.
Design A:Movable Shelves Design B:Adaptable Frames
First cost, $ - 2,500,000 - 1,100,000
AOC, $ per year - 130,000 - 65,000
Annual revenue, $ per year 800,000 625,000
Salvage value, $ 50,000 20,000
Life, years 6 4