Alessandro is a successful soccer player. He is considering buying a new Porsche. There are two options available: the new Porsche Panamera and the Porsche Boxter. Whichever model he chooses he plans to drive it for a period of around 4 years and then sell it. Assume that the trade-in value of both cars is the same at the end of the 4-year period. The two models have many differences, and Alessandro needs to make a financial comparison. The price at the car dealer in Torino of the Boxter is €48,000 and of the Panamera is €60,000. Alessandro believes that the difference of €12,000 to be the marginal cost difference between the two cars. However, his friend, who is an economist, tells him to look into more data before making a decision. Assume that the prevailing discount rate for both cars is 3% annually. Other information on this purchase is shown in the following table.

a. Calculate the total “true” cost for each car over the 4-year ownership period.

b. Calculate the total fuel cost for each car over the 4-year ownership period.

c. What is the marginal fuel cost from purchasing the Panamera?

d. What is the marginal cost of purchasing the Panamera?

e. What is the total marginal cost associated with purchasing the Panamera? How does that compare with the €12,000 that Alessandro calculated?

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Item Price Engine (liters) Cylinders Depreciation over 4 years Finance charges over entire 4-year period Insurance over 4 years Taxes and fees over 4 years Maintenance/repairs over 4 years Average fuel economy (1/100 km) Ownership period in years Kilometers driven per year over 4 years Cost per liter of diesel over 4-year ownership Boxter 48,000 6 25,000 6,183 8,500 2,220 3,300 5 4 8,000 1.2 Panamera 60,000 4.8 8 32,000 7,900 9,600 4,000 3,300 9 4 8,000 1.2