I'm having trouble where to starts, I know all the formulas and I've been watching all my lectures but I don't know where to start the question.

You are currently using your 2011 Subaru for your coconut delivery business. It requires an overhaul of $1500 if you decide to keep it. Otherwise, it has a current salvage (re-sale) value of $9k. The resale value is expected to fall by $1000 each year. The operating and maintenance costs are $2k for the coming year but increasing by 30% each year thereafter. MARR = 10%.

You are considering replacing it with a new vehicle. You have considered various options including a CRV, a Rav4, and a 4-Runner. After comparing the vehicles their economic service lives by performing an incremental IRR analysis, you've decided the optimal replacement vehicle is the 4-Runner. The 4-Runner's ESL is N*=6 with AEC_C*= $6500.

Your intention is to continue operating your business for the foreseeable (indefinite) future. Since the vehicle is the primary expense for your coconut delivery business, you want an accurate estimate of your annual vehicle cost for the project lifetime. To do this, you need to follow the following procedure:

1)First determine the optimal replacement plan for your indefinite project. The first step in this procedure is to determine the optimal time to replace the Subaru. Find the ESL of the Subaru. Next compare the AEC_C*to the AEC_D*and consider whether or not you need to perform a marginal analysis as part of your decision on replacement. If required, perform marginal analysis.

2) After you've determined the optimal replacement plan, describe your indefinite plan using the notation of the course, and sketch your indefinite plan in a cash-flow diagram so you can more easily and carefully do equivalence analysis.

3) To start the process of finding the annual equivalent cost of the indefinite plan (AEC) first find the present equivalent cost of the indefinite plan (PEC) as an intermediate step, and then use that value to find the AEC.

The AECis within $50 of which of the following?

A)5900

B)6000

C)6100

D)6200

E) None of the Above