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Suppose you want to buy a new car and trying to choose between two models:...

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Accounting

Suppose you want to buy a new car and trying to choose between two models:

Model A: costs $18,000 and its gas mileage is 30 miles per gallon and its insurance is $300 per year.

Model B: costs $24,000 and its gas mileage is 20 miles per gallon and its insurance is $500 per year.

If you drive approximately 40,000 miles per year and the gas costs $3 per gallon:

Find a formula for the total cost of owning Model A where the number of years is the independent variable.

Find a formula for the total cost of owning Model B where the number of years is the independent variable.

Find the total cost for each model for the first five years.

If you plan to keep the car for four years, which model is more economical? How about if you plan to keep it for six years?

Find the number of years in which the total cost to keep the two cars will be the same.

Identify the number of months where neither car holds a cost of ownership advantage.

What effect would the cost of gas doubling have on cost of ownership? Graph or show hand calculations.

If you can sell neither car for 40% of its value at any time, how does the analysis change? Graph or show hand calculations.

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