Question

A vehicle costs $18,000 when new and has a trade-in value of $7,800 at the end of four years. Its operating expense is $3,150
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Calculations
Amount $
Particulars Y0 Y1 Y2 Y3 Y4 Total Note
Vehicle Cost 18,000.00                    -                   -                 -                        -   18,000.00 A
Operating Expenses                  -          3,150.00     3,213.00 3,277.26          3,342.81 12,983.07 B Inflation rate is 2% so Operating Expenses will increase by 2% every year.
Additional cost                  -                      -       1,000.00               -                        -       1,000.00 C
Trade in Value                  -                      -                   -                 -          (7,800.00) (7,800.00) D
Net costs 18,000.00        3,150.00     4,213.00 3,277.26        (4,457.19) 24,183.07 E=A+B+C+D
PV Factor @ 10%             1.00           0.9091        0.8264      0.7513             0.6830 F
Present Value 18,000.00        2,863.67     3,481.62 2,462.21        (3,044.26) 23,763.23 G=E*F
Total cost of owning vehicle is 23,763.23 See G
Annual equivalent cost of owning vehicle     5,940.81 H=G/4
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