Joshua Trucking Has Chosen a New Software Package Tied to Satellite

question 110

Essay

Joshua Trucking has chosen a new software package tied to satellite global positioning system (GPS), in order to monitor its fleet. The software will be outdated after three years and replaced. The software vendor has given Joshua Trucking the choice of buying the software for $65,000 or leasing it for an annual payment of $25,000. To attract customers, the GPS vendor allows lease payments at year-end. The firm has decided to purchase the vendor's service contract under either option. Assume that depreciation is on a straight-line basis, Joshua Trucking's cost of obtaining funds is nine percent, and the firm is in the 34 percent tax bracket. Should it borrow and buy or lease the GPS software?

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Definitions:

Control Group

In experimental research, a group of subjects that do not receive the experimental treatment, serving as a comparison for evaluating the effect of the treatment.

Experimental Treatment

A procedure or therapy that is being tested and has not yet been proven effective.

Autonomy

The capability of an individual or system to make decisions independently, without external influence or control.

Experimental Group

A group within an experiment that receives the treatment or intervention under investigation to test its efficacy or effects.