Purchase P $17,000 $25,358.85 $6,339.

71
22531.0094 5632.7523
Travel 40,000
Mileage 25
1600 per year
$2 $2 $3 $3
$3,200 $3,200 $3,200 $3,200
$11,894.71

Maintenance $1,200 $1,200 $1,200 $1,200

Salvage $9,000 $4,460.52
-7996.383
Midsize Car
Given Inputs

Purchase Price $17,000

Gas Mileage 25
Annual Maintenance Cost $1,200
Salvage Value $9,000

Travel (in Miles) 40,000

Gas Cost Lower Range $2.00
Gas Cost Upper Range $4.00
Increment in Gas Cost $0.25

Annual Gas Cost (using $2) $3,200 Travel in Miles / Mileage * Gas Cost per Mile

Computation of NPV
NPV shall be computed by taking present values of all the cost and deducting the present value of Salvage Amount.
I shall be using PV function of excel to compute the present values and mention the inputs for this function for your

Time Amount Present Value

Purchase Price 0 $17,000 ($17,000.00)

Maintenance 1-4 $1,200 ($4,460.52)
Gas Cost (using $2 base Rate) 1-4 $3,200 ($11,894.71)
Salvage Value 4 ($9,000) $7,996.38
NPV ($25,358.85)

Annual Cost $6,822.22

We can convert the NPV for 4 years into annual equivalent cost by using PMT function of Excel; inputs being
Here are the inputs for Annual Equivalent Cost
Rate Time (Nper) Annuity (PMT)

3% 4 0
 Rahul:
since this amount shall
recur every year

Rahul:
leage * Gas Cost per Mile since this amount shall
recur every year

e present value of Salvage Amount.

he inputs for this function for your guidance.

Excel Function Inputs

Rate Time (Nper) Annuity (PMT) Future Value Type
(FV)
3% 0 0 $17,000 0 Ending by default
3% 4 $1,200 $0 0 Ending by default
3% 4 $3,200 $0 0 Ending by default
3% 4 $0 ($9,000) 0 Ending by default

unction of Excel; inputs being

Present Value Type

($25,358.85) 0 Ending by default

Rahul:
since this amount shall
recur every year