answer 11

0. A used automobile can be purchased by a student to provide transportation to and from school for $5,500 as is (i.e., the auto will have no warranty). First-year maintenance cost is expected to be $350 and the maintenance costs will increase by $100 per year thereafter. Operation costs for the automobile will be $1,200 for every year the auto is used and its salvage value decreases by 15% per year. (a) What is the economic life without considering the time value of money? (b) With interest at 10%, what is the economic life? 11. As an alternative to the used automobile in Problem 10, the student can purchase a new "utility" model for $13,600 with a 3-year warranty. First-year maintenance cost is expected to be $50 and the maintenance cost will increase by $50 per year thereafter. Operation costs for this new automobile are expected to be $960 for each year of use and its salvage value decreases by 20% per year. What is the economic advantage of the new automobile without interest; with interest at 10%