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To Purchase the Hydrovac Truck or Not?
In February of 2010, Vice President Scott Mudie of Oakville Hydro Inc. submitted an application to grant their subsidiary company El-Con $500,000. El-Con is a full service underground utility company that is owned by Oakville Hydro. Purchasing a new hydrovac truck would create a huge risk/reward scenario that could benefit both companies exponentially. The plan that Scott Mudie laid out is to front El-Con $450,000 for the hydrovac truck and $50,000 for extra costs. The truck would take 5 month from order to delivery and the plan is to order it immediately. The extra $50,000 could be used to fund costs such as the increase in two extra workers, extra gas expenses, and repair or maintenance of the truck. El-Con is currently renting a truck for roughly $150,000 annually. The two factors for Oakville Hydro to consider are to keep renting the hydrovac truck or purchase this new one that will last El-Con 8 years. Some of the pros for purchasing the truck are gaining a competitive advantage, lower project bidding, and more potential overall projects. The economy has been struggling in 2008 and 2009 but forecasts show for an immediate increase for 2010. That will also mean an increase in the housing starts, which is the target market for these companies. With high rewards there are also some serious potential risks. A few of the cons to purchasing this truck are more upfront costs, the economy continues to fall, and El-Con not being able to pay off the loan to Oakville Hydro. With all that being said, I strongly believe that the advantages of purchasing a new hydrovac truck outweigh renting it.
In February of 2010, Vice President Scott Mudie of Oakville Hydro Inc. submitted an application to grant their subsidiary company El-Con $500,000. El-Con is a full service underground utility company that is owned by Oakville Hydro. Purchasing a new hydrovac truck would create a huge risk/reward scenario that could benefit both companies exponentially. The plan that Scott Mudie laid out is to front El-Con $450,000 for the hydrovac truck and $50,000 for extra costs. The truck would take 5 month from order to delivery and the plan is to order it immediately. The extra $50,000 could be used to fund costs such as the increase in two extra workers, extra gas expenses, and repair or maintenance of the truck. El-Con is currently renting a truck for roughly $150,000 annually. The two factors for Oakville Hydro to consider are to keep renting the hydrovac truck or purchase this new one that will last El-Con 8 years. Some of the pros for purchasing the truck are gaining a competitive advantage, lower project bidding, and more potential overall projects. The economy has been struggling in 2008 and 2009 but forecasts show for an immediate increase for 2010. That will also mean an increase in the housing starts, which is the target market for these companies. With high rewards there are also some serious potential risks. A few of the cons to purchasing this truck are more upfront costs, the economy continues to fall, and El-Con not being able to pay off the loan to Oakville Hydro. With all that being said, I strongly believe that the advantages of purchasing a new hydrovac truck outweigh renting it.