You are looking to purchase a new vehicle for $25,789. This vehicle gets 22 mpg

Question

You are looking to purchase a new vehicle for $25,789. This vehicle gets 22 mpg and you average driving 14,000 miles per year. You expect that gasoline will average $2.10 per gallon for the first year and will increase 15% per year but it will never get above $5 per gallon because of government controls. Maintenance is included for the first two years but after that you think that maintenance will cost $1,000 and increase by 10% per year after that. The vehicle will lose 30% of its value the first year but the salvage value will only decrease by 10% per year after that. For an interest rate of 5%, what is the economic life of the vehicle?

Explanation / Answer

Solution.

Calculation of economic life of vehicle.

Life of Vhicle = 7 year.

Year Value Decrese in Value Depreciation Value 0     25,789.00 30%      7,736.70 1     25,789.00 10%      2,578.90 2     25,789.00 10%      2,578.90 3     25,789.00 10%      2,578.90 4     25,789.00 10%      2,578.90 5     25,789.00 10%      2,578.90 6     25,789.00 10%      2,578.90 7     25,789.00 10%      2,578.90 Total 100%    25,789.00

Related Questions

Navigate

• Browse (All)
• Browse Y
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.