Your old car costs you $300per month in gas and repairs. If you replace it, you could sell the old car immediately for $2,000. To buy a new car that would last seven years, you need to pay out $12,200 immediately. Gas and repairs would cost you only $100 per month on the new car. Interest is 9% compounded monthly. Should you buy a new car (Alternative 1) or keep your old car (Alternative 2)? Compute the net present value of each alternative and determine which alternative should be accepted or rejected according to the net present value criterion. What will be the net present value for Alternative 1 (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) What will be the net present value for Alternative 2. (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) What will be the preferred alternative.
Your old car costs you $300per month in gas and repairs. If you replace it, you could sell the old car immediately for $2,000. To buy a new car that would last seven years, you need to pay out $12,200 immediately. Gas and repairs would cost you only $100 per month on the new car. Interest is 9% compounded monthly. Should you buy a new car (Alternative 1) or keep your old car (Alternative 2)? Compute the net present value of each alternative and determine which alternative should be accepted or rejected according to the net present value criterion. What will be the net present value for Alternative 1 (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) What will be the net present value for Alternative 2. (Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.) What will be the preferred alternative.
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
Section: Chapter Questions
Problem 1PS
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Your old car costs you $300per month in gas and repairs. If you replace it, you could sell the old car immediately for $2,000. To buy a new car that would last seven years, you need to pay out $12,200 immediately. Gas and repairs would cost you only $100 per month on the new car. Interest is 9%
compounded monthly. Should you buy a new car (Alternative 1) or keep your old car (Alternative 2)? Compute thenet present value of each alternative and determine which alternative should be accepted or rejected according to the net present value criterion.
compounded monthly. Should you buy a new car (Alternative 1) or keep your old car (Alternative 2)? Compute the
What will be the net present value for Alternative 1
(Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.)
What will be the net present value for Alternative 2.
(Round the final answer to the nearest dollar as needed. Round all intermediate values to six decimal places as needed.)
What will be the preferred alternative.
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