Question

John needs a commute car. He has three options shown in the following table, using annual worth analysis, what is the Annual Worth (AW) Cost of Each Option. MARR = 8% compounded monthly.

2003 Subaru	2006 Accord	Rent
Purchasing Price	$   6,000.00	$ 8,500.00	$               -
Annual Operation Cost	$      500.00	$ 200.00	$2,500 Rental
Resale price	$   2,500.00	$    4,000.00
Years to keep	3	4	Forever

Answer 1

Annual worth =- Purchase price*(A/P,8%,n)- Annual operation cost + Resale price*(A/F,8%,n)

The annuity tables have been used for finding Capital recovery (A/P) and Sinking fund factor (A/F)

	2003 Subaru	2006 Accord	Rent
Purchasing Price	$   6,000.00	$8,500.00	$               -
Annual Operation Cost	$      500.00	$200.00	$2,500 Rental
Resale price	$   2,500.00	$    4,000.00
Years to keep	3	4	Forever
Annual worth = -Purchase price*(A/P,8%,n)- Annual operation cost + Resale price*(A/F,8%,n)	-2058	-1878.55	-2500

WORKINGS