Question

10. Chris Evans drives 300 miles per week in his Honda Civic that gets 22 miles per gallon of gas. He is considering buying a new fuel-efficient car for $20,000 (after trade-in of your Honda CIVIC) that gets 50 miles per gallon. Insurance premiums for the new car and old care are $900 and $500 per year respectively. If he decides to keep his car, he need to spent $1200 on repairs. Assume gas costs $3.50 per gallon. Over a 5-year period. a. what is the cost of the old car? b. what is the cost of the new car?

Answer 1

Assuming there are 52 weeks in a year

Total of 5 years

Per Week the Miles are 300 miles

Total Miles over the course of 5 years = Miles per Week * Number of Weeks in a Year * Number of Years

= 300 * 52 * 5 = 78,000 miles in 5 years

Cost of Old Car

Miles per Gallon = 22 miles

Total Gallon of Gas Required in 5 years = Total Miles in 5 Years/Miles per Gallon = 78000/22 = 3545 Gallons of Gas Required

Cost per Gallon of Gas = $ 3.5 per Gallon

Total cost of Gas = Gallons of Gas Required in 5 years * Cost per Gallon = 3545 * 3.5 = $12,408

Insurance Premium per Year = $500

Total Insurance Premiuim = $500*5 = $2500

Total Cost of Repairs = $1200

Total Cost of Old Car = Total Cost of Gas + Total Insurance Premium + Total Cost of Repairs = 12,408 + 2500 + 1200 = $16108

Total Cost of Old Car = $16,108

Cost of New Car

Miles per Gallon = 50 miles

Total Gallon of Gas Required in 5 years = Total Miles in 5 Years/Miles per Gallon = 78000/50 = 1560 Gallons of Gas Required

Cost per Gallon of Gas = $ 3.5 per Gallon

Total cost of Gas = Gallons of Gas Required in 5 years * Cost per Gallon = 1560 * 3.5 = $5460

Insurance Premium per Year = $900

Total Insurance Premiuim = $900*5 = $4500

Purchase Price of New Car = $20,000

Total Cost of New Car = Total Cost of Gas + Total Insurance Premium + Purchase Price of New Car = 5460 + 4500 + 20,000 = $29,960

Total Cost of New Car = $29,960