An experimental composite engine block for an automobile will trim 20 pounds of weight compared with a traditional cast iron engine block. It is estimated that at least $2,500 in life-cycle costs will be saved for every pound of weight reduction over the engine’s 8-year expected life. Given that the engine’s life is 8 years, what assumptions have been made to arrive at the $2,500 per pound savings? (2.1)
The assumptions that can be made to arrive at $2,500 per pound savings.
Explanation of Solution
The total mileage driven would have to be specified in addition to the variable cost of fuel per unit or dollar per gallon.
Also, the fixed cost of both engine blocks should be assumed. The efficiency of the composite engine and traditional engine should also has be mentioned.
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