A person is planning to purchase a car. A new car is costing rupees 3 lacs. The resale value of the car at the end of the year is 85% of the previous year. Maintenance and repair cost during the first year are rupees 10000 and they increase by 15 % every year. The minimum resale value of the car can be rupees 75000. (a) When should the car be replaced to minimize average annual cost? (b) If interest rate of 12% is assumed, calculate the average cost at the end of 10 years.

A person is planning to purchase a car. A new car is costing rupees 3 lacs. The resale value of the car at the end of the year is 85% of the previous year. Maintenance and repair cost during the first year are rupees 10000 and they increase by 15 % every year. The minimum resale value of the car can be rupees 75000. (a) When should the car be replaced to minimize average annual cost? (b) If interest rate of 12% is assumed, calculate the average cost at the end of 10 years.

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter3: Cost-volume-profit Analysis

Section: Chapter Questions

Problem 8EB: Shonda & Shonda is a company that does land surveys and engineering consulting. They have an...

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