Homework Help is Here – Start Your Trial Now!
Business
Economics
A commercial vehicle is purchased for an acquisition cost of $300,000. The operating and maintenance costs (0&M) and trade in values in years 1,2, 3 and 4 of the life of the vehicle are shown in the Table. Calculate the economic life (the time when you should replace the vehicle to achieve lower cost/ year of ownership) and the equivalent annual cost for this replacement policy. Use discounted costs and a discount rate of 15% Year 1 2 3 4 O&M costs ($) 30000 45000 65000 117500 Trade in value ($) 235000 190000 160000 127500 Ref: This example is from Hastings (2010) Physical Asset Management, Springer. Replacement every 2 years, $133,140/yr Replacement every 4 years, $139,102/yr Replacement every 3 years, $130,364/yr Replacement every 3 vears. $30.000/vr

A commercial vehicle is purchased for an acquisition cost of $300,000. The operating and maintenance costs (0&M) and trade in values in years 1,2, 3 and 4 of the life of the vehicle are shown in the Table. Calculate the economic life (the time when you should replace the vehicle to achieve lower cost/ year of ownership) and the equivalent annual cost for this replacement policy. Use discounted costs and a discount rate of 15% Year 1 2 3 4 O&M costs ($) 30000 45000 65000 117500 Trade in value ($) 235000 190000 160000 127500 Ref: This example is from Hastings (2010) Physical Asset Management, Springer. Replacement every 2 years, $133,140/yr Replacement every 4 years, $139,102/yr Replacement every 3 years, $130,364/yr Replacement every 3 vears. $30.000/vr

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter17: Long-term Investment Analysis
Section: Chapter Questions
Problem 2E
See similar textbooks
icon
Related questions
Question
How to get to the answer? Please show full working. Answer should be C) Replacement every 3 years, $130, 364/year. Hand written plz
A commercial vehicle is purchased for an acquisition cost of $300,000. The operating and maintenance costs (O&M) and trade in values in years 1,2, 3 and 4 of the life of the vehicle are shown in the Table. Calculate the economic life (the time when you should replace the vehicle to achieve lower cost/ year of ownership) and the equivalent annual cost for this replacement policy. Use discounted costs and a discount rate of 15% Year 1 2 3 4 O&M costs ($) 30000 45000 65000 117500 Trade in value ($) 235000 190000 160000 127500 Ref: This example is from Hastings (2010) Physical Asset Management, Springer. Replacement every 2 years, $133,140/yr Replacement every 4 years, $139,102/yr Replacement every 3 years, $130,364/yr Replacement every 3 years, $30,000/yr
Transcribed Image Text:A commercial vehicle is purchased for an acquisition cost of $300,000. The operating and maintenance costs (O&M) and trade in values in years 1,2, 3 and 4 of the life of the vehicle are shown in the Table. Calculate the economic life (the time when you should replace the vehicle to achieve lower cost/ year of ownership) and the equivalent annual cost for this replacement policy. Use discounted costs and a discount rate of 15% Year 1 2 3 4 O&M costs ($) 30000 45000 65000 117500 Trade in value ($) 235000 190000 160000 127500 Ref: This example is from Hastings (2010) Physical Asset Management, Springer. Replacement every 2 years, $133,140/yr Replacement every 4 years, $139,102/yr Replacement every 3 years, $130,364/yr Replacement every 3 years, $30,000/yr
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 2 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Cash Flow
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Managerial Economics: Applications, Strategies an…
Managerial Economics: Applications, Strategies an…
Economics
ISBN:
9781305506381
Author:
James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:
Cengage Learning
Economics: Private and Public Choice (MindTap Cou…
Economics: Private and Public Choice (MindTap Cou…
Economics
ISBN:
9781305506725
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
Microeconomics: Private and Public Choice (MindTa…
Microeconomics: Private and Public Choice (MindTa…
Economics
ISBN:
9781305506893
Author:
James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher:
Cengage Learning
SEE MORE TEXTBOOKS