The correct answer is A. $480,000 . In the CVS Value Methodology context, life-cycle cost includes the initial cost, recurrent annual costs, and discrete future replacement expenditures over the defined service period. SAVE’s VM Dictionary defines life-cycle cost as the sum of initial cost, recurrent annual cost, single expenditures, and disposal or salvage value over a specified period. It also defines recurrent annual cost as operation and maintenance cost occurring throughout each year, and single expenditure as a future replacement outlay occurring at discrete times during service life.

For Car A , the initial cost is $40,000 . Annual fuel use is calculated as:

40,000 km ÷ 10 km/liter = 4,000 liters per year

4,000 liters × $9 = $36,000 per year

$36,000 × 12 years = $432,000

Replacement costs occur every two years during the 12-year service period, excluding a replacement at the end of year 12 because the vehicle’s service life ends. Therefore, replacements occur at years 2, 4, 6, 8, and 10 :

5 × ($600 batteries + $1,000 tires) = 5 × $1,600 = $8,000

Total LCC = $40,000 + $432,000 + $8,000 = $480,000 .

References/topics: Evaluation Phase; Life-Cycle Cost; Initial Cost; Recurrent Annual Cost; Single Expenditure; Cost Analysis.