Question 13.11: A new vehicle costs $19,999 plus $400 in fees. Its value dro...

Engineering Economic Analysis

A new vehicle costs $19,999 plus $400 in fees. Its value drops 30% the first year, 20% per year for Years 2 through 4, and 15% each additional year. When the car is sold, detailing and advertising will cost $250. Repairs on similar vehicles have averaged $50 annually in lost time (driving to/from the dealer’s shop) during the 3-year warranty period. After the warranty period, the cost of repairs and the associated inconvenience climbs at $400 annually. If the MARR is 8%, what is the optimal economic life for the vehicle?

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