HTM $32200$

Hospitality Facilities Management

Homework Assignment $3$

Due Tuesday, January $23,2024$

You are the manager of a hotel. Your hotel needs a new vehicle to transport guests to and from the

airport. You have selected two different replacement vehicles. The cost information for one of the

vehicles is listed below. The cost information for the two vehicle options is listed below. You plan on

keeping the vehicle for $5$ years. The costs listed below are based on information found on

Edmonds.com

at $7$:$30$ am on August $20,2023.$

Option $1,$ Purchase new vehicle with a gasoline engine

Purchase Price: $$35,000.$ You pay $$15,000$ down $($including trading$-$in value of the old vehicle$)$

and finance the remaining $$20,000$ at a nominal annual rate of $14\mathrm{.}99\%$ for five years,

resulting in a monthly payment of $$465\mathrm{.}87.$ This is paid at the end of the month. Total

payment is $$42,952\mathrm{.}46.$

Maintenance Cost: The maintenance schedule for the vehicle is as shown below. Assume all

payments are made at the end of the year.

Year $1$: $$120$

Year $2$: $$515$

Year $3$: $$535$

Year $4$: $$2,410$

Year $5$: $$1,870$

Repair Cost: The vehicle comes with a two$-$year warranty $(0$ cost for the first two years$).$ You

sign a contract for the remaining three years that will cost $$150$ per year $($starting at the

beginning of the third year$)$ with an annual increase of $125\mathrm{.}00\%.$ This payment is made at the

beginning of each year.

Insurance Cost: $$715$ per year with an annual increase of $3\mathrm{.}250\%$ per year. This payment is made

at the beginning of the year.

Fuel Cost: $$175$ per month with a monthly increase of $0\mathrm{.}0220\%.$ This payment is made at the end

of the month.

Sale tax: $$1,450$ due when you purchase the vehicle.

License plate fee: $$325$ per year with an annual inflation rate of $-11\mathrm{.}55\%.$ This payment is made

at the beginning of the year.

At the end of $5$ years the salvage value is expected to be $$25,000.$