Question

What is the life cycle cost of a vehicle under the following scenario: Initial cost is...

What is the life cycle cost of a vehicle under the following scenario: Initial cost is $50,000. Maintenance cost is $2500/yr. The maintenance increases $500/yr starting in year 5. The car is sold in year 10 for $10,000. The interest rate is 4%/yr. PLEASE INCLUDE A CASH FLOW DIAGRAM or I will not rate. Thank you!

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Answer #1
Year Initial cost Annual cost Resale value Net Cash flow Discount factor Present value
0 -50000 -50000 1.00000 -50000.00
1 -2500 -2500 0.96154 -2403.85
2 -2500 -2500 0.92456 -2311.39
3 -2500 -2500 0.88900 -2222.49
4 -2500 -2500 0.85480 -2137.01
5 -2500 -2500 0.82193 -2054.82
6 -3000 -3000 0.79031 -2370.94
7 -3500 -3500 0.75992 -2659.71
8 -4000 -4000 0.73069 -2922.76
9 -4500 -4500 0.70259 -3161.64
10 -5000 10000 5000 0.67556 3377.82
Present value -68866.79

Life cycle cost = 68867

Cash flow diagram

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