Your car costs $2800 annually in maintenance cost. It will last three more years. You...
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Your car costs $2800 annually in maintenance cost. It will last three more years. You could replace it with a newer vehicle costing $14,000. The annual maintenance cost for the new car will be $500 per year and it is expected to last for 10 years. Ignore salvage values for both cars. The opportunity cost of capital is 12% per annum. You plan to use the equivalent annual cost method to determine if your car should be replaced. What will be the equivalent annual cost (including the maintenance cost) for the new car?
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