A delivery car had a first cost of $32,000, an annual operating cost of $13,000, and an estimated $5500 salvage value after its 6- year life. Due to an economic slowdown, the carwill be retained for only 4 years and must be sold now as a used vehicle. At an interest rate of 15% per year, what must the market value of the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full life cycle? Hint: What is the annual worth at that particular year, when the car is sold out?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
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A delivery car had a first cost of $32,000, an
annual operating cost of $13,000, and
an estimated $5500 salvage value after its 6-
year life. Due to an economic slowdown, the
carwill be retained for only 4 years and must
be sold now as a used vehicle. At an interest
rate of 15% per year, what must the market
value of the used vehicle be in order for its
AW value to be the same as the AW if it had
been kept for its full life cycle? Hint: What is
the annual worth at that particular year, when
the car is sold out?
Transcribed Image Text:A delivery car had a first cost of $32,000, an annual operating cost of $13,000, and an estimated $5500 salvage value after its 6- year life. Due to an economic slowdown, the carwill be retained for only 4 years and must be sold now as a used vehicle. At an interest rate of 15% per year, what must the market value of the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full life cycle? Hint: What is the annual worth at that particular year, when the car is sold out?
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