Tom is considering purchasing a $22400 car. After five years, he will be able to sell the vehicle for $8000. Petrol costs will be $2000 per year, insurance $600 per year, and parking $600 per year. Maintenance costs for the first year will be $1000, rising by $400 per year thereafter. The alternative is for Tom to take taxis everywhere. This will cost an estimated $6000 per year. Tom will rent a vehicle each year at a total cost (to year-end) of $600 for the family vacation, if he has no car. If Tom values money at 11 percent annual interest. What is the annual worth of buying a car? Should he buy a car? Enter YES or NO in the units box. Note: (Use a negative sign (-) for an overall cost)
Tom is considering purchasing a $22400 car. After five years, he will be able to sell the vehicle for $8000. Petrol costs will be $2000 per year, insurance $600 per year, and parking $600 per year. Maintenance costs for the first year will be $1000, rising by $400 per year thereafter. The alternative is for Tom to take taxis everywhere. This will cost an estimated $6000 per year. Tom will rent a vehicle each year at a total cost (to year-end) of $600 for the family vacation, if he has no car. If Tom values money at 11 percent annual interest. What is the annual worth of buying a car? Should he buy a car? Enter YES or NO in the units box. Note: (Use a negative sign (-) for an overall cost)
Chapter5: The Time Value Of Money
Section: Chapter Questions
Problem 35P
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Tom is considering purchasing a $22400 car. After five years, he will be able to sell the vehicle for $8000. Petrol costs will be $2000 per year, insurance $600 per year, and parking $600 per year. Maintenance costs for the first year will be $1000, rising by $400 per year thereafter.
The alternative is for Tom to take taxis everywhere. This will cost an estimated $6000 per year. Tom will rent a vehicle each year at a total cost (to year-end) of $600 for the family vacation, if he has no car. If Tom values money at 11 percent annual interest.
What is the annual worth of buying a car?
Should he buy a car? Enter YES or NO in the units box.
Note: (Use a negative sign (-) for an overall cost)
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