4.9 Natasha Gurdin is debating which of two possible models of a car to buy (A or B), being indifferent with
regard to their technical performance. She has been told that the average monthly cost of owning
model A, based on an LCC analysis, is $500.
a. Using the following data for model B, calculate its LCC and determine which model is the better
choice for Natasha:
| | |
|-----------------------|--------------|
| Purchase price | $23,000 |
| Life expectancy | 4 years |
| Resale value | $13,000 |
| Maintenance | $1,100 per year |
| Operational cost (gas, etc.) | $90 per month |
| Car insurance | $1,400 per year |
| Mean time between failures | 14 months |
| Repair cost per failure | $650 |
b. Develop a general model that can be used to calculate the LCC for a car.