Contemporary Engineering Economics 6th Edition by Chan Park

Exercise 24

An automobile that runs on electricity can be purchased for $25,000. The automobile is estimated to have a life of 12 years with annual travel of 20,000 miles. Every three years, a new set of batteries will have to be purchased at a cost of $3,000: Annual maintenance of the vehicle is estimated to cost $700. The cost of recharging the batteries is estimated at $0.015 per mile. The salvage value of the batteries and the vehicle at the end of 12 years is estimated to be $2,000. Suppose the MARR is 7%. What is the cost per mile to own and operate this vehicle based on the preceding estimates The $3,000 cost of the batteries is a net value with the old batteries traded in for the new ones.