Determine janes equivalent perpetual annual cost

Reference no: EM131908919

Problem

A major repair on the suspension system of Jane's 3-year old car cost her $2,000 because the warranty expired after 2 years of ownership. Based on this experience, she will plan on additional $2000 expenses every 3 years henceforth. Also, she spends $800 every 2 years for maintenance now that the warranty is over. This is for years 2, 4, 6, 8 and 10 when she plans to donate the car to charity. Use these costs to determine Jane's equivalent perpetual annual cost (for years 1 through infinity) at i=5% per year, if cars she owns in the future have the same cost pattern.

Reference no: EM131908919

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