Your boss has asked you to look into optimizing the commercial van ownership strategy for your company. The company you work for bought a van for $85,600 for making deliveries. You expect the van to be driven 29,500 miles per year, with each mile costing you around $0.64 per mile in the first year. The operating cost per mile is expected to increase by 6% per year after the first year. The resale value of the van is expected to decrease by 20% in the first year and then by 9% per year from there on out. What is the optimal ownership period (economic life) in years assuming a MARR of 8%? Hint: You are trying to find which ownership period in years results in your yearly costs being the lowest (AW of costs). That is the ownership period that would make it the cheapest to own that item on a per year basis. 5 years 4 years 7 years O 6 years 8 years
Your boss has asked you to look into optimizing the commercial van ownership strategy for your company. The company you work for bought a van for $85,600 for making deliveries. You expect the van to be driven 29,500 miles per year, with each mile costing you around $0.64 per mile in the first year. The operating cost per mile is expected to increase by 6% per year after the first year. The resale value of the van is expected to decrease by 20% in the first year and then by 9% per year from there on out. What is the optimal ownership period (economic life) in years assuming a MARR of 8%? Hint: You are trying to find which ownership period in years results in your yearly costs being the lowest (AW of costs). That is the ownership period that would make it the cheapest to own that item on a per year basis. 5 years 4 years 7 years O 6 years 8 years
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Transcribed Image Text:Your boss has asked you to look into optimizing the commercial van ownership
strategy for your company. The company you work for bought a van for $85,600 for
making deliveries. You expect the van to be driven 29,500 miles per year, with each
mile costing you around $0.64 per mile in the first year. The operating cost per mile
is expected to increase by 6% per year after the first year. The resale value of the van
is expected to decrease by 20% in the first year and then by 9% per year from there
on out. What is the optimal ownership period (economic life) in years assuming a
MARR of 8%?
Hint: You are trying to find which ownership period in years results in your yearly
costs being the lowest (AW of costs). That is the ownership period that would make
it the cheapest to own that item on a per year basis.
5 years
4 years
O 7 years
6 years
8 years
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