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

jagguarpaw January 11, 2017 0 Comments

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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.