Question

13-28 Bill’s father read that each year a car’s value declines by 10%. He also read that a new car’s value declines by 10% as it is driven off the dealer’s lot.

13-28 Bill's father read that each year a car's value declines by 10%. He also read that a new car's value declines 090 as it is driven off the dealer's lot. Mainte- nance costs and the costs of "car problems" are only $100 per year during the 2-year warranty period. Then they jump to $600 per year, with an annual by 1 increase of $400 per year. Bill's dad wants to keep his annual cost of car ownership low. The car he prefers cost $22,000 new and he uses an interest rate of 10%. For this car, the new vehicle warranty is transferrable. (a) If he buys the car new, what is the minimum cost life? What is the minimum EUAC? (b) If he buys the car after it is 2 years old, what is the minimum cost life? What is the minimum EUAC? (c) If he buys the car after it is 4 years old, what is the minimum cost life? What is the minimum EUAC? (d) If he buys the car after it is 6 years old, what is the minimum cost life? What is the minimum EUAC? (e) What strategy do you recommend? Why?