What is the economic life of vehicle

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Reference no: EM132063930

You are looking to purchase a new vehicle for $24,500. This vehicle gets 21 mpg and you average driving 15,000 miles per year. You expect that gasoline will average $2.40 per gallon for the first year and will increase 15% per year but it will never get above $5 per gallon because of government controls. Maintenance is included for the first two years but after that you think that maintenance will cost $1,000 and increase by 10% per year after that. The vehicle will lose 30% of its value the first year but the salvage value will only decrease by 10% per year after that. For an interest rate of 6%, what is the economic life of the vehicle?

Reference no: EM132063930

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