Suppose that a new car costs $10,000 and that the annual operating cost and resale value of the car are as shown in Table.
Age of Car (Years)
Resale Value ($)
Operating Cost ($)
1
7,000
300
(year 1)
2
6,000
500
(year 2)
3
4,000
800
(year 3)
4
3,000
1,200
(year 4)
5
2,000
1,600
(year 5)
6
1,000
2,200
(year 6)
If I have a new car now, determine a replacement policy that minimizes the net cost of owning and operating a car for the next six years.
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