Taxi driver get a new cab every 200,000 miles
Not what you're looking for?
A taxi driver drives a taxi 50,000 miles a year. A new cab costs $12,000. He can drive the cab 200,000 miles with original engine and transmission. (It lasts longer than an ordinary car because he changes oil every 3,000 miles and because a taxi engine never gets cold, he explains.) Repair cost will average $0.04 a mile for the first 200,000 miles. After 200,000 miles, he can sell the car for $200 or spend $2,000 for a rebuilt engine and transmission. With a new engine and transmission, the cab will then last another 200,000 miles with additional repair costs averaging $0.08 a mile. The salvage value after 400,000 miles is approximately zero. His required return is 10%.
Should he get a new cab every 200,000 miles or every 400,000 miles assuming year-end cash flow for simplicity?
Purchase this Solution
Solution Summary
The expert examines if taxi drivers should get a new cab every 200,000 miles or 400,000 miles.
Purchase this Solution
Free BrainMass Quizzes
Introduction to Finance
This quiz test introductory finance topics.
Marketing Management Philosophies Quiz
A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking