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# The Cost of Driving Assignment. You can work this assignment, applied to your own car, and turn it in before the day listed on the course schedule to make up for a missed homework To receive credit, you must type your work, show all calculations, and append copies of the vehicle appraisals requested below. Submit your work to me

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## The Cost of Driving Assignment. You can work this assignment, applied to your own car, and turn it in before the day listed on the course schedule to make up for a missed homework To receive credit, you must type your work, show all calculations, and append copies of the vehicle appraisals requested below. Submit your work to me by e-mail as a single PDF file that includes your work and copies of the appraisals. In this problem we will estimate the economic costs of driving for your car (if possible). The website edmunds.com contains a "Used Car Appraiser" that gives values for most used cars. (It takes a little hunting to find it.) Pick a car, yours if possible, that meets these three criteria: 1) it's on the used car section of the website, 2) it must not be the first year of the model, and 3) the same model, one year older, must also be on the used car section of the website. At the top of the page, type your vehicle make and year, its total mileage and annual mileage, and all of the following: annual insurance cost, gas mileage, typical annual maintenance costs for a car your age and type, the current price of the gas that you put in your car, the replacement value (retail) of your car, the value of the same car one year older with the same mileage, and the value of the same car one year older with an additional year's mileage. These last three come from the web site-you'll have to use the used car vehicle appraiser. Then, using this information, complete the following. . . . . The cost of driving assignment 11 miles per gallon Annual maintenance $761 . Current price for regular gas $2.72 • Retail value 24,597 • 2016 Chevrolet 1500 High Country Silverado Total miles 136,000 Average yearly miles 22,666 Annual insurance cost $834 Value of same truck $32,999 Value of truck one year older $23,989 A) Calculate the per mile cost of gas. $0.24 B) Calculate the per mile maintenance cost. $0.034 C) Calculate the average cost per mile of insurance. $0.037 D) Calculate the "opportunity cost of capital," that is, the interest paid (or foregone) on the money you have currently invested in the car, for one year. You can probably find an interest rate on the web site, or you can make up your own (reasonable) interest rate. E) Calculate the average interest cost per mile. F) Calculate total depreciation on the car as the difference between the retail value of the car and the value of the same car one year older with an extra year's mileage. G) Calculate age depreciation as the difference between the value of the car and the value of the same car one year older with the same mileage. H) Calculate use depreciation as the difference between total depreciation and age depreciation. I) Calculate the average depreciation cost per mile. J) Calculate the marginal depreciation cost-the amount the car depreciates for each mile it is driven. K) Classify each of the following costs as either fixed or variable: gas, maintenance, insurance, interest, age depreciation, and use depreciation. L) Calculate the average costs of driving the car, per mile. Use (some of) your results in a)-j). M) Calculate the marginal costs of driving the car, per mile. Use (some of) your results in a)-j). N) The State of Texas reimburses mileage for private cars driven on state business at 55€ per mile. If no one else needed to use your car, and you needed to travel on state business, should you drive your own car or take a state car of the same level of quality, safety, and comfort? What about if the reimbursement rate was 25€ per mile? O) An analog here to "increasing output with existing capacity" would be driving faster. We know that the law of diminishing returns applies whenever a firm tries to increase output by using more of a variable input with its existing capacity. In the current situation, what is the fixed factor? The variable input? The output? How does driving faster exhibit diminishing returns?

## Expert Answer

A) Calculate the per mile cost of gas. $0.24 The per mile cost of gas is calculated by taking the current price of regular gas and dividing it by the average miles per gallon of the car. In this case,…
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**Related Book For**

## Personal Finance An Integrated Planning Approach

8th edition

Authors: Ralph R Frasca

ISBN: 978-0136063032

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