An independent over-the-road (OTR) truck driver-owner paid $68,000 for a used tractor-trailer. The salvage value of the rig after 5 more years of use is expected to be $36,000. The operating cost is $0.50 per mile and the base mileage rate (i.e., revenue) is $0.61 per mile.
(a) How many miles per year must the owner drive just to break even at an interest rate of 10% per year?
(b) If the owner drives 600 miles per day, how many days per year will be required for break even?
(a) Let x = miles per year to breakeven
0 = -68,000(A/P,10%,5) + 36,000(A/F,10%,5) – 0.50x + 0.61x
0 = -68,000(0.26380) + 36,000(0.16380) – 0.50x + 0.61x
0.11x = 12,041.60
x = 109,469 miles/year
(b) No. days = 109,469/600
= 182 days/year
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