Argument to convince him to finance the car

Assignment Help Business Economics

Reference no: EM13833401

Jay Wechsler agrees to purchase a car from a local dealer, the Con Car Co. The purchase price is $15,000. Jay has the cash to pay the entire amount and wants to do so. Con's sales manager ises the following argument to convince him to finance the car: "Al we require is a down payment of $3,000. Then you can barrow the $12,000 from our finance company at 12 percent. You will make monthly payments of $266.93 for 5 years (60 months), a total of $16,015.80. If you do that, you get to keep your $12,000. Now suppose you keep this money in a money market account that pays you 8 percent compounded quarterly. In 5 years, the $12,000 will grow to $17,831.40. That means that you will be better off by $1,815.60 than if you pay the $12,000 in cash."

Assume all the numbers are correct. Does the offer sound too good to be true? Why? (This is an argument often used by automobile dealers. One of the authors encountered it while buying a car.)

Reference no: EM13833401

Questions Cloud

Research the variables that impact the pricing of options : Research the variables that impact the pricing of options. Focus your energy on comparingthe attributes of the two widely accepted models used for option pricing: Black-Scholes and Binomial Models. Your paper should be completed in Word and be no les..

Considering liquidating these assets : You own a large collection of fine wines. You are considering liquidating these assets. You predict that the value of your collection will rise in the next few years. If you assume your cost of capital to be 10 percent, when should you sell your coll..

Case study - business process model and notation : Case Study - Business Process Model and Notation (BPMN). In order to discuss business processes, it is useful to have a documentation standard. The Business Process Model and Notation (BPMN) is such a standard - a global standard

Health insurance-high-risk and low-risk consumers : Suppose there are two types of people who need health insurance; high-risk and low-risk consumers. High-risk consumers have a relatively high probability of needing expensive medical care and on average incur $2,000 of medical expenses per year.

Argument to convince him to finance the car : Jay Wechsler agrees to purchase a car from a local dealer, the Con Car Co. The purchase price is $15,000. Jay has the cash to pay the entire amount and wants to do so. Con's sales manager ises the following argument to convince him to finance the car..

What is the amount of nationals total assets : What is the amount of National's total assets? What is the amount of National's total liabilities? What is the amount of National's stockholders' equity?

Price elasticity assumed by consultant-elasticity estimate : The Prestige Office Equipment Company produces and sells different types of office furniture. One of the important items it sells is a high quality desk. Assume the variable unit cost per desk in the coming year will remain the same. Evaluate the pro..

Creating a topic summary- technology and cars : You will be creating a topic summary and APA citation page. But here, in this discussion, you will only choose a topic and do a bit of research on the Internet

Supply and demand schedules-what is the equilibrium price : Below are supply and demand schedules for calzones at a local pizzeria. What is the equilibrium price? At what price is there a shortage of 60 calzones? At what price is there a surplus of 60 calzones? At a price of $13, there is a surplus of how ma..

User Account

All Pages