A carsharing organization is considering adding a new line of luxury cars to their offering. The carsharing rate structure is based on cost per hour and miles driven. Assume $4/gallon for gas. The chosen vehicle is a McMaster EP-1 sedan, which costs $52,400 new. Fuel economy according to the Canadian government is 20 mpg city and 29 mpg highway, for a combined fuel economy of 24 mpg; you can use the 24 mpg value for purposes of calculating fuel costs in the problem. Since the vehicle is valuable, collision insurance is expensive, so the insurance cost is $4,800 per year. The organization buys the vehicle from a dealer with an auto loan at 3.9% interest, with one annual payment per year. After 5 years of useful life, they sell the vehicle for $25,000, which can also be annualized at a 3.9% discount rate. Maintenance is expected to cost $800 per year. The car is expected to be driven by members 15,000 miles per year, and each hour of reservation is expected to generate 6 miles of driving. The carsharing agency will set prices per hour and per mile for the vehicle based on the total revenue they anticipate being necessary. They wish to achieve revenue per year that is exactly twice the total cost per year, and this cost should be contributed 75% from hourly charges and 25% from mileage charges. (1) Calculate the total cost per mile, to the nearest $0.01. Tip: Total cost: capital (purchase cost & salvage cost), fuel, maintenance and insurance costs. You do not need to consider hourly cost. NOTE: If the answer to (1) is wrong, the answer to (2) is also wrong. Think carefully. (2) What values of cost per hour and cost per mile should be adopted to exactly meet the organization’s revenue goals?
A carsharing organization is considering adding a new line of luxury cars to their offering. The
carsharing rate structure is based on cost per hour and miles driven. Assume $4/gallon for
gas. The chosen vehicle is a McMaster EP-1 sedan, which costs $52,400 new. Fuel
economy according to the Canadian government is 20 mpg city and 29 mpg highway, for a
combined fuel economy of 24 mpg; you can use the 24 mpg value for purposes of calculating
fuel costs in the problem.
Since the vehicle is valuable, collision insurance is expensive, so the insurance cost is $4,800
per year. The organization buys the vehicle from a dealer with an auto loan at 3.9% interest,
with one annual payment per year. After 5 years of useful life, they sell the vehicle for
$25,000, which can also be annualized at a 3.9% discount rate. Maintenance is expected to
cost $800 per year. The car is expected to be driven by members 15,000 miles per year, and
each hour of reservation is expected to generate 6 miles of driving.
The carsharing agency will set prices per hour and per mile for the vehicle based on the total
revenue they anticipate being necessary. They wish to achieve revenue per year that is
exactly twice the total cost per year, and this cost should be contributed 75% from hourly
charges and 25% from mileage charges.
(1) Calculate the total cost per mile, to the nearest $0.01.
Tip: Total cost: capital (purchase cost & salvage cost), fuel, maintenance and insurance
costs. You do not need to consider hourly cost.
NOTE: If the answer to (1) is wrong, the answer to (2) is also wrong. Think carefully.
(2) What values of cost per hour and cost per mile should be adopted to exactly meet the
organization’s revenue goals?
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