You should spend 80 min, to complete the following three problems (open-book. NO
ID: 2494131 • Letter: Y
Question
You should spend 80 min, to complete the following three problems (open-book. NO open-note): Problem 1 : An engineer is asked to provide the company with an estimated total cost for both a new and used vehicle over the 5 year test period. A new vehicle costs 20,000 dollars and has an annual maintenance and operating cost of 15,000 dollars. A used vehicle costs 10,000 and has an annual maintenance and operating cost of 19,000 dollars. It is also estimated that the new car will have a salvage value of 8,000 dollars and the used car will have a salvage value of 4,000 dollars. Determine the total present value of costs as a discount rate of 10 percent. (Show all of your work) ....Explanation / Answer
PV = cashflow/(1+i)^n
where i = 10% and n is the number of period.
year New vehicle Salvage value Total cash flow PV @ 10% Old Vehicle Salvage value Total cash flow PV @ 10% 0 costs - 20,000 - 20,000 - 20,000 - 10,000 - 10,000 - 10,000.0 1 maintenance cost - 15,000 - 15,000 - 13,636 - 19,000 - 19,000 - 17,272.7 2 maintenance cost - 15,000 - 15,000 - 12,397 - 19,000 - 19,000 - 15,702.5 3 maintenance cost - 15,000 - 15,000 - 11,270 - 19,000 - 19,000 - 14,275.0 4 maintenance cost - 15,000 - 15,000 - 10,245 - 19,000 - 19,000 - 12,977.3 5 maintenance cost - 15,000 8,000 - 7,000 - 4,346 - 19,000 4,000 - 15,000 - 9,313.8 Total present value - 71,894 - 79,541Related Questions
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