Tom Jackson is preparing to buy a new car. He knows it represents a large expenditure of money, so he wants to do an analysis to see which of two cars is more economical. Alternative A is an American-built compact car. It has an initial cost of $8900 and operating costs of 9ϕ km, excluding depreciation. Tom checked automobile resale statistics. From them he estimates the American automobile can be resold at the end of
3 years for $1700. Alternative B is a foreign-built Fiasco. Its initial cost is $8000, the operating cost, also excluding depreciation, is 8 ϕ km. How low could the resale value of the Fiasco be to provide equally economical transportation? Assume Tom will drive 12,000 km/year and considers 8% as an appropriate interest rate.