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You are considering two options. First option is an electric engine powered car, and it would take $30,000 to purchase the car. Besides, you need to change battery every 6 years. The cost of new battery is $3,000. The interest rate is 12% per year. The second option is a gasoline engine car, which cost $20,000 initially. The annual maintenance cost for gasoline engine car is $3,000, and the fuel cost per mile is so 16. On the other hand, it cost $0.04/mile for electric powered car, and annual maintenance cost is $5000. At the end of 12 years, the electric powered car can be sold for $8,000, and the gasoline powered car can be sold for $3,000. Under the assumption that you do not need to change the battery before selling the electric car at the end of year 12, and each car is driven for 15,000 miles/year.

a. Calculate the total cost of ownership per mile for each of the car?

b. Which car do you prefer to buy if DN alternative does not exist?

Financial Management, Finance

  • Category:- Financial Management
  • Reference No.:- M92386675

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