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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