A delivery car had a first cost of $36,000 an annual operating cost of $18,000, and...

A delivery car had a first cost of $36,000 an annual operating cost of $18,000, and an estimated $5500 salvage value after its 6-year life. Due to economic slowdown, the car will be retained for only 3 years and must be sold now as a used vehicle. At an interest rate of 15% per year, what must the market value of the used vehicle be in order for its AW value to be the same as the AW if it had been kept for its full cycle?

The market value of the used vehicle is determined to be $__________?

Expert Solution

Set the AW for 6 years = AW for 3 years

Let the market value of used vehicle be X

-36000*(A/P,15%,6)-18000+5500*(A/F,15%,6) = -36000*(A/P,15%,3)-18000+X*(A/F,15%,3)

-36000*0.264237-18000+5500*0.114237 = -36000*0.437977-18000+X*0.287977

-26884.2285 = -33767.2+X*0.287977

X = 6882.7715/0.287977

X = 23900

Rahul Sunny answered 2 years ago

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