Question

QUESTION 2 Abdulla owns a old LEXUS and it averages 20 miles per gallon (mpg). He has found a FORD F150 (roughly the same functionality) that averages 26 mpg. He can sell his old LEXUS for $2800 and purchase the FORD F150 for $4,000. Assume a cost of gasoline $4.00 per gallon How many miles per year must be driven if he wants to recover his investment in three years? Assume an interest rate of 6%, zero salvage value for either vehicle after three years, and identical maintenance cost. Use PW Analysis for this problem. A. 2800+(x/20(4.00)(P/A,6%,3) What is unknown for this problem? B.9729 - Equation for PW 1= 6- Equation for PW 2= C-Ax= (miles/year) o d w wo C. km D. 4000+4x(P/A,6%,3) 5000+(x/26)(4.00)(P/A,6%,3) 4000+(x/26)(4.00)(P/A,6%,3) G. Cost H. 4000+(x/26)(4.00)(F/A,6%,3)

Answer 1

(1) The Unknown = (C) km

(2) Equation for PW1 = (F) 4000 + (x/26) (4.00) (P/A, 6%, 3)

(3) Equation for PW2 = (A) 2800 + (x/20) (4.00) (P/A, 6%, 3)

(x) x = (B) 9729

4000 + (4x/26) x 2.673 = 2800 + (4x/20) x 2.673

1200 + (2x/13) x 2.673 = (x/5) x 2.673

2.673 x [(x/5) - (2x/13)] = 1200

[(x/5) - (2x/13)] = 448.93

(13x - 10x)/65 = 448.93

3x = 29180.7

x = 9727