Suppose you want to buy a new car and trying to choose betweentwo models:
Model A: costs $17,000 and its gas mileage is 20 miles pergallon and its insurance is $200 per year.
Model B: costs $25,000 and its gas mileage is 35 miles pergallon and its insurance is $400 per year.
If you drive approximately 40,000 miles per year and the gascosts $3 per gallon:
Find a formula for the total cost of owning Model A where thenumber of years is the independent variable.
Find a formula for the total cost of owning Model B where thenumber of years is the independent variable.
Find the total cost for each model for the first five years.
If you plan to keep the car for four years, which model is moreeconomical? How about if you plan to keep it for six years?
Find the number of years in which the total cost to keep the twocars will be the same.
Identify the number of months where neither car holds a cost ofownership advantage.
What effect would the cost of gas doubling have on cost ofownership? Graph or show hand calculations.
If you can sell neither car for 40% of its value at any time,how does the analysis change? Graph or show hand calculations.
