Question
10. 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
10. 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?
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