My friend drives a 2010 Nissan Altima with ? 105,500 miles. Assuming he could drive this car for up to 5 more years and then sell, calculate the equivalent uniform annual cost of ownership over the next 5 years.
1. Estimate 6 costs of ownership over the next 5 years. He knows his car is aging, so at least two of your cash flows need to be gradient cash flows. Explain each of your estimates (e.g. if you estimate a salvage value, explain why). There are many sources of information about costs for cars (library, internet, local mechanics,. . . ). The more specific your information is to this car, the better.
2. Compute his EUAC, showing work.
3. Now perform a sensitivity analysis by considering if one of the factors you have estimated was either 20% higher than you estimated or 20% lower than you estimated. How will this affect your EUAC.
4. Identify one replacement options and calculate the same set of costs of ownership for that car.
5. Determine if and when you would recommend him to replace his car.