PAD 505 Week 5 Discussion 2, Cost-Benefit Analysis

PAD 505 Week 5 Discussion 2, "Cost-Benefit Analysis" 

1. In a heavily debated City Council meeting, one year ago, Cobb County learned that by buying larger garbage trucks it could reduce labor cost for garbage removal. Note: All the dollar amounts below are in this year’s (present) dollars.
2. The cost of the trucks today (one year later) is $400,000.
3. The annual savings in this year’s dollars is $90,000.
4. The trucks will last for four years and then will be sold for $100,000.
5. The city can borrow money at a 7% discount rate to purchase the trucks.
6. Inflation for the next four years is expected to average 3%.
7. Assuming the cost and benefits are incurred at the end of the year, should the city buy the trucks?