A consulting engineering firm is considering two models of SUVs for the company principals. A GM model will have a first cost of $36,000, an operating cost of $4000, and a salvage value of $15,000 after 3 years. A Ford model will have a first cost of $32,000, an operating cost of $3100, and also have a $15,000 resale value, but after 4 years. (a) At an interest rate of 15% per year, which model should the consulting firm buy? Conduct an annual worth analysis. (b) What are the PW values for each vehicle?

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
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A consulting engineering firm is considering two
models of SUVs for the company principals. A
GM model will have a first cost of $36,000, an operating
cost of $4000, and a salvage value of
$15,000 after 3 years. A Ford model will have a
first cost of $32,000, an operating cost of $3100,
and also have a $15,000 resale value, but after
4 years. (a) At an interest rate of 15% per year,
which model should the consulting firm buy? Conduct
an annual worth analysis. (b) What are the
PW values for each vehicle?

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