Annual mileage rate is breakeven based net present value

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You need to replace your car. Car A costs $10,000 and $0.50 per mile to operate. Car B costs $15,000 and $0.40 cents per mile to operate. Both cars will last five years. Car A can then be sold for $3, 500; Car B for $5,000. At a discount rate of 10%, at what annual mileage rate (i.e. miles driven per year) is breakeven based Net Present Value. Which car do you prefer at mileage rates above and below the breakeven point? Assume operating costs are incurred at the end of each year.

Reference no: EM131445564

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