If the owner earns 8% interest on her investments, determine the present worth (

Question

If the owner earns 8% interest on her investments, determine the present worth (at purchase) of owning a car with the following costs (EOY = end of year). Initial down payment = $2200 Annual payments = $5500. EOY 1-EOY 4 Annual insurance = $1500, paid EOY Gas & oil & minor maintenance = $2000. EOY 1. growing $100 annually each year after Replacement tires = $650 at EOY 4 Major maintenance = $2400 at EOY 5 Salvage value = $4750 at EOY 6 Interest Factor Calculator $39,767 $42,583 $57,317 $39,118

Explanation / Answer

Present Value Year Intial Down Payment Annual Payment Annual Insurance Gas,Oil and minor maintenanse Replacement tires Major Maintenanse Salvage value Total Net cash flow PV@8% PV 0               2,200         2,200       1.0000         2,200 1           5,500         1,500           2,000         9,000       0.9259         8,333 2           5,500         1,500           2,100         9,100       0.8573         7,802 3           5,500         1,500           2,200         9,200       0.7938         7,303 4           5,500         1,500           2,300             650         9,950       0.7350         7,314 5         1,500           2,400         2,400         6,300       0.6806         4,288 6         1,500           2,500        -4,750           -750       0.6302           -473               2,200        22,000         9,000        13,500             650         2,400        -4,750       45,000                 6       36,767

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