Michael likes driving cars and buys nearly identical ones whenever the old one needs replacing.

Typically, he trades in his old car for a new one costing about $15 000.

A new car warranty covers all repair costs above standard maintenance (standard maintenance costs are constant over the life of the car) for the first two years.

After that, his records show an average repair expense (over standard maintenance) of $2500 in the third year (at the end of the year), increasing by 50 percent per year thereafter.

If a 30 percent declining-balance depreciation rate is used to estimate salvage values, and interest is 8 percent, use the provided formula sheet to determine how often Michael should get a new car.

Depreciation Rate: Linear Interpolation: Sinking Fund Factor (A/F,i,N) = (1 +-1 Uniform Series Compound After-tax IRR: After-tax MARR: Effective Interest Rate: Modified Benefit-Cost Ratio: Amount Factor PW(capital costs) Benefit-Cost Ratio: PW(benefits) PWcosts) Book Value, Declining-Balance: Payback Period: Capital Recovery Factor Effective Interest Rate for Continuous Compounding: First cost Payback period= Annual savings APiN) Real Dollars: e Series Present Worth Factor Expected Value of the Discrete Random Variable: Book Value, Straight-Line: Arithmetic Gradient to Annuity Conversion Factor Financial Ratios: Capital Tax Factor: Quick assets Current liabilities dl i/2 Acid test ratio Real MARR: Geometric Gradient Series to Present Worth Conversion Factor Current assets Current liabilities Capital Salvage Factor: e Current ratio- MARR +MARR td CSF-1- G+d) . Equity ratio =- Total assets Total Real Interest Rate: Capitalized Value: Sales Inventory turnover Real IRR: Capital Recovery Formula: Return on- Profits after taxes Total assets A = (P-S)(A/P,i,N ) + Si IRRR total assets Compound Interest: Depreciation Amount, Straight Simple Interest Amount: Growth-Adjusted Interest Rate: Compound Interest Factors: Depreciation Amount, Declining Internal Rate of Return: Balance: Compound Amount Factor R-D . Present Worth Factor A - PIA/P,i, N] P = A [P/A, i, N] P = A[P/A, g,i,N] Crash Cost per Unit Time Crash Cost-Normal Cost Normal Time Crash Time