Economically preferable to use higher octane gasoline

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Casey must determine ifit is economically preferable to use higher octane gasoline in his new car. The higher octane has a cost of higher than that of the lo octane gas. $0.20/gallon year. He believes that if he Casey uses approximately 500 gallons of gas per uses the higher octane gas, he will extend the life of her car by one year (from a useful life of nine years to a useful life of ten years). His car has an initial cost of $22,000 and an assumed salvage value of $0. Given an interest rate of 8% compounded annually, should Casey use the higher octane gas?

Reference no: EM131359900

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