Solution is Attached. I need help explaining how to get the answers
Car Problem:
Owner trades in every six years, interest on money is 10%, gasoline is $3.25/ gallon, the user drives 16,000 miles/ year, tires are replaced every 36 months. Assume gasoline prices escalate 5% per year.
Questions:
1.What is the present worth life cycle cost of each car?
2.What is the annualized life cycle cost of each car?
3.What is the cost per mile for each car?
4.What are the non-monetary considerations?
LIFE CYCLE COST ANALYSIS (LCCA) Project/Location: PROBLEM NO. 1H - SOLUTION Car Selection Alternative 1 Alternative 2 Alternative 3 Subject: Description: Project Life Cycle = Discount Rate = Present Time = 16,000 Miles/ Year 6 Years 10.0% Date of Occupancy CAR A - Sedan 22 miles/gallon CAR B-SUV 16 miles/gallon CAR C-Hybrid 40 miles/ gallon INITIAL COSTS Quantity UM Unit Price PW PW Est. PW 21,000 $21,000 $40,000 $32,000 Est. 21,000 0 1,050 40,000 A. CAR A - Sedan 1 Each B. CAR B - SUV 1 Each C. CAR C-Hybrid 1 Each D. Sales Tax 5% E Tax Credit - Hybrid 1 Each Total Initial Cost Initial Cost PW Savings (Compared to Alt. 1) 40,000 1,050 2,000 2,000 32,000 1,600 (2,400) ($2,400) 32,000 1,600 (2,400) 31,200 (9,150) 22,050 42,000 (19,950)| Year REPLACEMENT COSTI SALVAGE VALUE Description A Tire Replacement B. Battery Replacement (20%) 400 300 PW Factor 0.7513 0.7513 1.0000 1.0000 0.5645 400 1,000 300 751 (4,000) (14,000) (16,000) E. Salvage (Re-sale) Value Total Replacement/Salvage Costs (2,257) (1,957) (7,902) (7,452) (9,031) (7,980) ANNUAL COSTS Description A. Maintenance B. Gas Consumption $3.25 per gallon c. License & Insurance 400 Escl.% 0.00% 5.00% 0.00% 0.00% 0.00% PWA 4.355 5.115 4.355 4.355 4.355 2,364 1,742 12,089 6,533 500 3,250 2,500 2,178 16,622 10,888 600 1,300 2,000 2,613 6,649 8,711 1,500 Total Annual Costs (Present Worth) 20,364 29,688 17,973 40,457 Total Life Cycle Costs (Present Worth) Life Cycle Savings (Compared to Alt. 1) 64,236 (23,779) 41,193 (736) Total Life Cycle Costs (Annualized) PP Factor 0.2296 9,289 Per Year 14,749 Per Year 9,458 Per Year Cost per Mile 16,000 Miles $0.58 Per Mile $0.92 Per Mile $0.59 Per Mile LIFE CYCLE COST ANALYSIS (LCCA) Project/Location: PROBLEM NO. 1H - SOLUTION Car Selection Alternative 1 Alternative 2 Alternative 3 Subject: Description: Project Life Cycle = Discount Rate = Present Time = 16,000 Miles/ Year 6 Years 10.0% Date of Occupancy CAR A - Sedan 22 miles/gallon CAR B-SUV 16 miles/gallon CAR C-Hybrid 40 miles/ gallon INITIAL COSTS Quantity UM Unit Price PW PW Est. PW 21,000 $21,000 $40,000 $32,000 Est. 21,000 0 1,050 40,000 A. CAR A - Sedan 1 Each B. CAR B - SUV 1 Each C. CAR C-Hybrid 1 Each D. Sales Tax 5% E Tax Credit - Hybrid 1 Each Total Initial Cost Initial Cost PW Savings (Compared to Alt. 1) 40,000 1,050 2,000 2,000 32,000 1,600 (2,400) ($2,400) 32,000 1,600 (2,400) 31,200 (9,150) 22,050 42,000 (19,950)| Year REPLACEMENT COSTI SALVAGE VALUE Description A Tire Replacement B. Battery Replacement (20%) 400 300 PW Factor 0.7513 0.7513 1.0000 1.0000 0.5645 400 1,000 300 751 (4,000) (14,000) (16,000) E. Salvage (Re-sale) Value Total Replacement/Salvage Costs (2,257) (1,957) (7,902) (7,452) (9,031) (7,980) ANNUAL COSTS Description A. Maintenance B. Gas Consumption $3.25 per gallon c. License & Insurance 400 Escl.% 0.00% 5.00% 0.00% 0.00% 0.00% PWA 4.355 5.115 4.355 4.355 4.355 2,364 1,742 12,089 6,533 500 3,250 2,500 2,178 16,622 10,888 600 1,300 2,000 2,613 6,649 8,711 1,500 Total Annual Costs (Present Worth) 20,364 29,688 17,973 40,457 Total Life Cycle Costs (Present Worth) Life Cycle Savings (Compared to Alt. 1) 64,236 (23,779) 41,193 (736) Total Life Cycle Costs (Annualized) PP Factor 0.2296 9,289 Per Year 14,749 Per Year 9,458 Per Year Cost per Mile 16,000 Miles $0.58 Per Mile $0.92 Per Mile $0.59 Per Mile
