11 Jan

A new vehicle costs $15000 plus $400 in fees. Its value drops 30% the first year

by jagguarpaw On: Finance - 0 Comment

 

 

Question: A new vehicle costs $15,000 plus $400 in fees. Its value drops 30% the first year

PROBLEM 2 (Modified example 13-2) A new vehicle costs $15,000 plus $400 in fees. Its value drops 30% the first year, 20% per year for Years 2 through 4, and 15% each additional year. When the car is sold, detailing and advertising will cost $250. Repairs on similar vehicles have averaged $50 annually in lost time (driving to/from the dealer’s shop) during the 3-year warranty period. After the warranty period, the cost of repairs and the associated inconvenience climbs at $400 annually. If the MARR is 8%, what is the optimal economic life?

	IF RATIRED AT YEAR N AT interest rate I=8%
Year	Costs	%Drop in Salvage Value	Salvage Value	PW if kept through year n	UEAC of PW if kept through year n
0	$15,000.00
1	$50.00	0.30	10220.00
2	$50.00	0.20	8176.00
3	$50.00	0.20	6540.80
4	$450.00	0.15	5232.64
5	$850.00	0.15	4447.74
6	$1,250.00	0.15	3780.58
7	$1,650.00	0.15	3213.50
8	$2,050.00	0.15	2731.47
9	$2,450.00	0.15	2321.75
10	$2,850.00	0.15	1973.49
11	$3,250.00	0.15	1677.46
12	$3,650.00	0.15	1425.84
13	$4,050.00	0.15	1211.97
14	$4,450.00	0.15	1030.17
15	$4,850.00	0.15	875.65

 

PW =present worth

UEAC = equivalent uniform annual cost.

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