An electric automobile can be purchased for $25,000. The automobile is estimated to have a life of 12 years with annual mileage of20,000 miles. Every three years, a new set of batteries will have to be purchased at a cost of $3,000. The $3,000 cost of the batteries is a net value with the old batteries traded in for the new ones. Annual maintenance of the vehicle is estimated to cost $700. The cost of recharging the batteries is estimated at $0.015 per mile. The salvage value of the batteries and the vehicle at the end of 12 years is estimated at $2,000. Consider the MARR to be 7%. What is the cost per mile to own and operate this vehicle according to these estimates?

An electric automobile can be purchased for $25,000. The automobile is estimated to have a life of 12 years with annual mileage of20,000 miles. Every three years, a new set of batteries will have to be purchased at a cost of $3,000. The $3,000 cost of the batteries is a net value with the old batteries traded in for the new ones. Annual maintenance of the vehicle is estimated to cost $700. The cost of recharging the batteries is estimated at $0.015 per mile. The salvage value of the batteries and the vehicle at the end of 12 years is estimated at $2,000. Consider the MARR to be 7%. What is the cost per mile to own and operate this vehicle according to these estimates?

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 3E

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