A Company Wants to Determine the Optimal Replacement Policy for Its

Essay

A company wants to determine the optimal replacement policy for its delivery truck.New trucks cost $30,000.The company does not keep trucks longer than 2 years and has estimated the annual operating costs and trade-in values for trucks during each of the 2 years as:
Age in years
$\begin{array}{lll}&0-1&1-2\\\hline\text { Operating Cost } & \$ 15,000 & \$ 16,500 \\\text { Trade-in Value } & \$ 20,000 & \$ 16,000\end{array}$

Draw the network representation of this problem