1. You purchase a new truck. The dealer will provide at no additional cost all scheduled maintenance for the first two years. Future annual maintenance cost is expected to be $1,000 at EOY 3 and you project that those cost will increase 2% each year thereafter for the next 5 additional years. You plan to sell the truck after 8 years.

1. Draw your cash flow diagram from your perspective.
2. Assuming you have the money to invest and you estimate the return on your investment will be 6% per year, how much money should you initially invest (the same day you purchase the truck) to provide for your trucks future scheduled maintenance expenses?
3. On the day of purchase, the dealer is willing to sell you a maintenance warranty that will cover all scheduled maintenance for the next 8 years for $5,999. Is that a good deal? Based on your estimates, should you purchase the dealers scheduled maintenance warranty or make your investment to pay for future scheduled maintenance costs?