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Carl and Susan Jacks have invested their savings for some years carning at a rate of 6% per year to purchase, for cash, a mid-sized
Carl and Susan Jacks have invested their savings for some years carning at a rate of 6% per year to purchase, for cash, a mid-sized SUV for their family. After much scarching online and several showroom visits, two options are the finalists. The estimates below include all first cost elements (purchase, extended warranty, taxes, license, etc.) and AOC (insurance, fucl, regular maintenance, etc.). Perform a spreadsheet-based PW evaluation at 6% per year on two time bases and select the more economical vehicle. Carl wants to plan using a 10-year horizon and Susan believes they will get tired of a SUV after 5 years. She wants a shorter planning horizon. (a) Ten-year LCM with the repurchase of another Cadillac in year 5 for $65,000, which is $10,000 more than the first purchase. (b) Five-year study period (SP) assuming the resale value is 20% of the first cost for both SUVs. (c) Is the selection different between the LCM- and SP-based analyses? Carl and Susan Jacks have invested their savings for some years carning at a rate of 6% per year to purchase, for cash, a mid-sized SUV for their family. After much scarching online and several showroom visits, two options are the finalists. The estimates below include all first cost elements (purchase, extended warranty, taxes, license, etc.) and AOC (insurance, fucl, regular maintenance, etc.). Perform a spreadsheet-based PW evaluation at 6% per year on two time bases and select the more economical vehicle. Carl wants to plan using a 10-year horizon and Susan believes they will get tired of a SUV after 5 years. She wants a shorter planning horizon. (a) Ten-year LCM with the repurchase of another Cadillac in year 5 for $65,000, which is $10,000 more than the first purchase. (b) Five-year study period (SP) assuming the resale value is 20% of the first cost for both SUVs. (c) Is the selection different between the LCM- and SP-based analyses
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