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A vehicle costs $10,000 when new and has a trade-in value of $7,200 at the end of four years. Its operating expense is $4,000 per
A vehicle costs $10,000 when new and has a trade-in value of $7,200 at the end of four years. Its operating expense is $4,000 per year with an additional $2,000 for tires, tune up and battery at the end of the second year. All values are given in today's dollars. What is the equivalent annual cost of owning this vehicle for four years assuming a 10% market interest rate and expected inflation of 2%?
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