Unequal Lives. Having given the matter some thought, you decide that you would be equally happy buying and driving any of the following cars:

(a) A Supreme Deluxe and trading every sixth year.

(b) A Premium Fairmont and trading every third year.

(c) An Economy Delight and trading every second year.
You have decided to base your decision on the present value of the expected future costs. You have predicted your costs as follows:

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Select the alternative that promises the greatest financial advantage.

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Supreme Deluxe Premium Economy Fairmont Delight Original cost $30,000 $20,000 $15,000 Market value at trade-in time 8,000 8,000 8,000 Annual cash operating costs 2,400 2,000 1,500 Overhaul, fourth year 2,000 0 0 Overhaul, second year. 0 1,000 0 You believe that you will stick with this approach for at least six years. Your minimum desired rate of return is 10 percent. Ignore taxes.