Objective: Ability to setup and solve economic problem within specified constrai

Question

Objective: Ability to setup and solve economic problem within specified constraints. (10 pts) An Electric Vehicle (EV) can be purchased for $30,000 and is estimated to have a life of 15 years with annual travel of 15,000 miles. At the end of every 5 years, a new set of batteries must be purchased at a net cost of $4,000 (after trading in the old batteries) for continued use of the EV. Annual maintenance of the EV is estimated to be $400. The cost of recharging the batteries is estimated at $0.015 per mile. The salvage value of the EV is estimated to be $2,000 at the end of the 15 years. Suppose the MARR is 7%. Based on the given estimates, what is the equivalent uniform annual cost per mile to own and operate the EV? 2. Annual Cost Per Mile: $ Sketch of net cash flow diagram:

Explanation / Answer

Present value of Cash outflow of An Electric Vehicle:

Particulars Amount in $ Purchsed cost of EV 30000 Add: Present value of annual cost Battry purchasing cost 800 Annual maintenace cost 400 Battry recharging cost 225 Total present value of annual cost (1-15 Years) 1425 * 9.1079 12979 Less: Present value of Salave value 2000*0.3624 725 Total cash outflow....... 42254 PVAF (7%, 15 Years) 9.1079 Equivalent Annual Cost 42254/9.1079 4639 Annual Travel (Miles) 15000 Equivalent uniform annual cost per mile 4639/15000 0.3093

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