Equivalent Annual Cost (Corvette vs Mustang)

[jegues]

See figure attached for the question, please ignore any pencil marks or scribbles around it.

\(\displaystyle \text{For Reference: }\)

\(\displaystyle P = \text{Present Worth}\)

\(\displaystyle F = \text{Future Worth}\)

\(\displaystyle A = \text{Annuity}\)

\(\displaystyle \text{Example of using the mnemonic expressions is below, }\)

\(\displaystyle (\frac{A}{P}, i\%,N) \equiv \text{ A constant that when multiplied with the present worth, will provide the equivalent annuity over N peroids given a discount rate of i}\%\)

\(\displaystyle \text{Similiarly for the other mnemomic expressions.}\)

I am confused about the EAC for the mustang.

Here's my attempt at it,

The approach I took was to calculate the present worth of all the costs and salvages over the 10 year peroid and then amortized them over the 10 year peroid as a yearly annuity. For this attempt, please see the 2nd figure attached.

Can someone tell me what they get for EAC of mustangs for part (a) and the new EAC of mustangs in part (b)?

Thanks again!

 

[tkhunny]

It is VERY hard to read the second page.

I do get values in the neighborhood of yours, but do not understand why you've only two values? Where is the 25% increase for the second 5 years on the Mustang?

 

[jegues]

It is VERY hard to read the second page.

I do get values in the neighborhood of yours, but do not understand why you've only two values? Where is the 25% increase for the second 5 years on the Mustang?

The 25% increase is in part (b) of the same figure on the second page.

I mutiplied 2 terms by 1.25 for an additional 25%