Robert Roe has just purchased a four-year-old used car, paying $3,500 for it. A friend has suggested that he determine in advance how long he should keep the car so as to ensure the greatest overall economy. Robert has decided that, because of style changes, he would not want to keep the car longer than four years, and he has estimated the annual expenses and market values for years one through four as follows. If Roberts capital is worth 12% per year, at the end of which year should he dispose of the car?

Annual expenses:

Year 1: 950

yr 2: 1050

yr 3: 1100

Yr 4: 1550

MV at end of year

Yr1: 2250

Yr2: 1800

Yr3: 1450

Yr4: 1160