A new car costs $12, 000. Annual maintenance costs are as follows: m1 = $2,000 first year, m2 = $4,000 second year, m3 = $5,000 third year, m4 = $9,000 fourth year, and m5 = $12,000 fifth year and on. The car can be sold for s1 = $7,000 in the first year, for s2 = $6,000 in the second year, for s3 = $2,000 in the third year, and for s4 = $1,000 in the fourth year of ownership. An existing car can be sold at any time and another new car purchased at $12,000.

What buying/selling strategy for the next 5 years minimizes the total cost of ownership?

Answer rating: 100% (QA)

To minimize the total cost of ownership we need to find the best strategy for buying and selling the ... View the full answer