Calculate the present worth

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Reference no: EM13801715

You are in the process of deciding to buy a car. You found a brand new Hyundai Elantra for $22,000. You read the reviews and they all sound good. You plan to keep it for 5 years. You do some rough calculations on the amount of expenses which includes oil changes three or four times a year, one set of new tires during the 5 year period, one set of breaks, one major change of all the fluids and few other things. It comes to about $150 per month on average or $1800 per year for the 5 years. At the end of 5 years you plan to sell or trade it in for $5000. A friend of yours calls you with great news about a used car that is available for purchase. An elderly woman who used the car only to go back and forth to church and short distances wants to get rid of her car and it has very low mileage. She will sell it to you for a very low price of $12,000. You are now thinking about the $10,000 immediate savings. You also know the maintenance and the repair costs are going to be higher than the $150 per month you projected for the new car. This may need some engine work or transmission work and you estimate $250 per month or $3000 per year. You also estimate that at the end of the 5 year period the car may only be worth $500. On the basis of yearly cost, can you calculate the difference between these two cars and make the best decision. Also. Calculate the present worth.Your TVOM is 10%.

Reference no: EM13801715

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