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

## 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.