How much more-less would it cost you to own the hybrid

Assignment Help Financial Management

Reference no: EM131583450

You plan to buy a 2017 Honda Accord this year. The MSRP (manufacturer's suggested retail price) is $22,455. According to Edmunds.com, it costs an estimated $4,834 per year to operate (including fuel, taxes, insurance, and maintenance) and is expected to depreciate to $10,527 after 5 years.

When you go to Ken Garff Honda on 9th South and State Street, the salesman tries to convince you to buy the hybrid model, which has an MSRP of $29,605 (32% more expensive). According to Edmunds.com, it only costs an estimated $2,354 per year to operate (mostly due to lower fuel consumption) and is expected to depreciate to $14,912 after 5 years.

(a) If you plan to sell the Accord after five years, how much more/less would it cost you to own the Hybrid? You plan to pay cash for the car. Assume an opportunity cost of capital of 3%.

(b) Another option that Ken Garff Honda offers on the Honda Accord (non-hybrid) is a lease with a down payment of $2,444 and payments of $277 per month for 3 years. At the end of the lease, you have the option to buy the Honda Accord for $13,500. What is the implied effective annual interest rate you would be paying for the lease? Is the implied effective annual rate is good or bad and why?

Reference no: EM131583450

Questions Cloud

Computer-based order entry system-what is irr for project : Your firm is contemplating the purchase of a new $530,000 computer-based order entry system. what is the IRR for this project?

Housing is important component of the cost of living : The amount of income spent on housing is an important component of the cost of living.

Bond mutual funds and money market funds : you find out she was planning on taking all the money out of her company’s retirement plan and investing it in bond mutual funds and money market funds.

What is rate of return on your investment : What is the rate of return on your investment? You can assume tuition is a one-time payment today, Is this most likely a real return or a nominal return?

How much more-less would it cost you to own the hybrid : If you plan to sell the Accord after five years, how much more/less would it cost you to own the Hybrid? You plan to pay cash for the car.

The original loan term continues : If, in the event of cancellation, the original loan term continues? the company has to return the outstanding debt to the IOC immediately?

What are the results for each plan : What are the results for each plan? The interest rate is 10%

Profitability measures disclose about company performance : What do the company’s profitability measures disclose about the company’s performance

Net present value and internal rate of return : NET PRESENT VALUE AND INTERNAL RATE OF RETURN IBC is considering investing in two new projects – a new kiwi fruit sorting machine and new orange sorting machine

User Account

All Pages