Question 9 0 out of 10 points Ima Good-Student enrolls in ENGR 3202. She had con

Question

Question 9 0 out of 10 points Ima Good-Student enrolls in ENGR 3202. She had considered purchasing a new vehicle but decides that she can buy a good used vehicle and invest the difference in the stock market. Ima sells her current vehicle for $5000 and buys a low-mileage vehicle for $15000 in cash, no financing needed. She also realizes that she needs to account for maintenance and operation costs. Those costs are estimated to be $2000 per year and increases by $100 per year. She will keep the vehicle for six years and sell it for an estimated $3000. Her MARR is 8%. To explain her purchase in simpler terms for her friends, she will compute the equivalent cost of her purchase in terms of an equal payment series (A) in dollars per year. This equivalent cost is most nearly

Explanation / Answer

We need to calculate Equivalent Annual Cost

Present worth =Initial Investment+Operational Cost-Salvage Value

=15000+2000/1.08+2100/1.08^2+2200/1.08^3+2300/1.08^4+2400/1.08^5+2500/1.08^6-3000/1.08^6=-23407.6

Equivalent Annual Cost=PW(r(1+r)^n)/((1+r)^n-1)=23407.6(0.08(1.08^6)/((1.08^6)-1)=$5063.42

Equivalent Cost per annum is $5063.42

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