Your company needs to purchase a track hoe and has narrowed the selection to two pieces of equipment. The first track hoe costs $100,000 and has an hourly operation cost of $31.00 and a useful life of four years. At the end of four years its salvage value is $20,000. The second track hoe costs $65,000 and has an hourly operation cost of $36.00 and has a useful life of three years. At the end of three years its salvage value is $10,000. The operator cost is $29.00 per hour. The revenue from either track hoe is $95.00 per hour. Using 1,200 billable hours per year and a MARR of 20%, calculate the net present value for both track hoes. Assume that each option is repurchased until their useful lives end in the same year. Which track hoe should your company choose?
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