Question
Suppose you want to buy a new car and trying to choose between two models: Model A: costs $17,000 and its gas mileage is 20
Suppose you want to buy a new car and trying to choose between two models: Model A: costs $17,000 and its gas mileage is 20 miles per gallon and its insurance is $200 per year. Model B: costs $25,000 and its gas mileage is 35 miles per gallon and its insurance is $400 per year.Find the number of years in which the total cost to keep the two cars will be the same. Identify the number of months where neither car holds a cost of ownership advantage. What effect would the cost of gas doubling have on cost of ownership? show hand calculations. If you can sell neither car for 40% of its value at any time, how does the analysis change? show hand calculations.
Model A:
Costs $17,000
Gas Mileage is 20 Miles per gallon
$200 a year insurance
Total Cost=Per Year
Let X miles X=40,000 Gallon=x/20
C=17,000 + (40,000/20) * 3+200
17,000 + 2,000 * 3 + 200
17,000 + 6,000 + 200
=$23,200
Model B:
2) Cost $25,000
Gas Mileage is 35 per gallon
$400 a year insurance
Gallon = 40,000 / 35 = 1143 (approx.)
C=25,000 + 1,143 * 3 + 400
=$28,829
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