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Problem 5 (5 points) . You want to buy new battery-powered sports Bike. You can buy a more expensive one ( Model Exp ) or

Problem 5 (5 points). You want to buy new battery-powered sports Bike. You can buy a more expensive one (Model Exp) or cheaper one (Model Cheap) (but shorter-lived) one. Model Exp. costs $25,000 and has an anticipated life of 8 years. Its expected cost per mile is $0.5. Model Cheap costs $15,000, has an anticipated life of 6 years, and its expected cost per mile is $0.9. Model Exp has a market value of $5000 at the end of its life (8 years later) and Model Cheap will cost you $300 to dispose it at the end of its life. Regardless which model you will buy, you will run it for 500 miles per year.

  1. Fill the Cells marked in yellow with correct amount of cost numbers (in negative) (2 points)
  2. Compute NPV, PV, and EAC in cells marked green (2 points)
  3. Briefly explain which model to choose and why. (1 point)

PLEASE CLEARLY SHOW ALL EXCEL FORMULAS AND CALCULATIONS IN THE ANSWER.

image text in transcribed

Please show excel formulas next to the boxes, these calculations allow me to learn better.

Explain how you will decide which model to choose (1pt): Explain how you will decide which model to choose (1pt)

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