What must the market value of the two-year-old vehicle

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Reference no: EM131835812

A delivery car had a first cost of $30,000, an annual operating cost of $12,000, and an estimated $4000 salvage value after its 6-year life. Due to an economic slowdown, the car will be retained for only 2 years and must be sold now as used vehicle.

a). At an interest rate of 10% per year, what must the market value of the 2-year-old vehicle be in order for its AW value to be the same as the AW for a full 6-year life cycle?

b). Compare your answer in (a) with the first cost and expected salvage after 6 years. Is the required market value a reasonable one, in your opinion?

Reference no: EM131835812

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