Question

In: Civil Engineering

You are considering buying a vehicle to use in your daily errands. A used vehicle will...

You are considering buying a vehicle to use in your daily errands. A used vehicle will cost EGP85,000 and have a EGP20,000 market (salvage) value after a 5 years useful life, and consumes 2 liters of fuel per 10 km travelled. A new vehicle will cost EGP130,000 and have a EGP40,000 market value after a 6 years useful life. The new vehicle is expected to reduce fuel consumption compared with the used vehicle. You expect to drive the vehicle 18,000 km per year. Fuel costs EGP8/liter and the interest rate is 15% per year.

a) If the new vehicle is expected to reduce fuel consumption by 10% compared with

the used vehicle, which vehicle should you buy?

b) What is the percent reduction in the fuel consumption by the new vehicle that

would reverse the decision you made in part (a)?

c) Determine the percentage change in the salvage value of the new vehicle that

would reverse the decision made in part(a)?

Solutions

Expert Solution

Ally Wells answered 2 months ago
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