John is going to replace his car in 3 years when he graduates, but now he needs a radiator repair. The local shop has a used radiator, which will be guaranteed for 2 years, or they can install a new one, which is "guaranteed as long as you own the car.” The used radiator is $250, and the new one is $425. John assumes the used radiator will last 3 years but will need to be replaced so he can sell the car. He wants to analyze the alternatives. a. Graph the EUAW for the alternatives. Develop a choice table for interest rates from 0% to 30%. Use Excel. b. If the interest rate is 20%, which alternative should he choose?
John is going to replace his car in 3 years when he graduates, but now he needs a radiator repair. The local shop has a used radiator, which will be guaranteed for 2 years, or they can install a new one, which is "guaranteed as long as you own the car.” The used radiator is $250, and the new one is $425. John assumes the used radiator will last 3 years but will need to be replaced so he can sell the car. He wants to analyze the alternatives. a. Graph the EUAW for the alternatives. Develop a choice table for interest rates from 0% to 30%. Use Excel. b. If the interest rate is 20%, which alternative should he choose?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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