Example Problem: Timeshare Worth Calculation

Let’s break down the cost of a timeshare using the following values:

• Purchase Cost: $20,000
• Annual Maintenance Fee: $500
• Weeks Used Per Year: 2 weeks
• Years of Ownership: 10 years

Step 1: Calculate Total Maintenance Costs

The first step is to determine the total maintenance fees over the full ownership period.

$$\text{Total Maintenance Costs}=\text{Annual Maintenance Fee}\times \text{Years of Ownership}$$ $$\text{Total Maintenance Costs}=500\times 10=5,000$$

Step 2: Calculate Total Cost of Ownership

Now, add the initial purchase cost to the total maintenance costs to get the total cost of ownership.

$$\text{Total Cost of Ownership}=\text{Purchase Cost}+\text{Total Maintenance Costs}$$ $$\text{Total Cost of Ownership}=20,000+5,000=25,000$$

Step 3: Calculate Total Weeks of Usage

Next, find the total number of weeks you’ll be using the timeshare over the 10 years.

$$\text{Total Weeks Used}=\text{Weeks Used Per Year}\times \text{Years of Ownership}$$ $$\text{Total Weeks Used}=2\times 10=20\text{ weeks}$$

Step 4: Calculate Cost Per Week

Finally, calculate how much each week of timeshare usage is costing you.

Cost Per Week=Total Cost of OwnershipTotal Weeks Used\text{Cost Per Week} = \frac{\text{Total Cost of Ownership}}{\text{Total Weeks Used}}Cost Per Week=Total Weeks UsedTotal Cost of Ownership Cost Per Week=25,00020=1,250\text{Cost Per Week} = \frac{25,000}{20} = 1,250Cost Per Week=2025,000=1,250

Conclusion

The timeshare is costing you $1,250 per week. This gives you a clear idea of the worth of your investment.