Question

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 prerniums for the new car and old care are $900 and
$500 per year respectively. If he decides to keep his car, he will need to spend $1200 on repairs
per year. 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

• old car $20,909
• new car: $29,960

Explanation:

At 300 miles per week, Chris drives 300×52 = 15,600 miles per year. His gas cost can be figured as ...

(5 years)×(miles per year)÷(miles/gallon)×($ per gallon) = $273,000/(miles per gallon)

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a) old car cost = repair cost + gas cost + insurance cost

= 5($1200) + $273,000/22 + 5($500) ≈ $20,909 . . . over 5 years

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b) new car cost = purchase cost + gas cost + insurance cost

= $20,000 + $273,000/50 +5($900) = $29,960 . . . over 5 years