A Rolls-Royce cost $233,000 when you bought it 4 years ago. Due to the enhancements you have made to the vehicle, it was recently appraised at $255,000. If you sell the car, you will pay a $20,400 luxury tax. Currently, you are leasing your Rolls-Royce for $1,450/month to a limousine company and paying average service fees on the car of $270/month. The car’s annual registration with the Pennsylvania Department of Motor Vehicles costs $3,200. You are deciding whether to sell the Rolls or use it as your full-time family car. What value should you place on your Roll-Royce when analyzing the option of driving the car full time? a. $255,000 b. $234,600 c. $229,680 d. $233,000 e. $0

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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A Rolls-Royce cost $233,000 when you bought it 4 years ago. Due to the enhancements you have made to the vehicle, it was recently appraised at $255,000. If you sell the car, you will pay a $20,400 luxury tax. Currently, you are leasing your Rolls-Royce for $1,450/month to a limousine company and paying average service fees on the car of $270/month. The car’s annual registration with the Pennsylvania Department of Motor Vehicles costs $3,200. You are deciding whether to sell the Rolls or use it as your full-time family car. What value should you place on your Roll-Royce when analyzing the option of driving the car full time?

a. $255,000

b. $234,600

c. $229,680

d. $233,000

e. $0

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The value you place on your Roll-Royce when analyzing the option of driving the car full time = Value of car - Luxury Tax Paid

 

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