You are evaluating the purchase of a vehicle for your business. You've decided that the best...

You are evaluating the purchase of a vehicle for your business. You've decided that the best choice is a car that will cost you $35,000, but you're uncertain how long you should plan on holding the car before you replace it. The table below lists the running costs and salvage value of the vehicle for each year.

	1	2	3	4	5
Running Costs	-3000	-3500	-4000	-4500	-5000
Salvage Value	25000	20000	15000	10000	5000

What is the annual equivalent cost of replacing the vehicle every 3 years? Assume your cost of capital is 12.2%. Enter your answer to the nearest cent. Ignore taxes.

(Your answer will be a cost, and therefore a negative number. Don't forget the minus sign.)

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Expert Solution

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 month ago

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