Use an annual worth comparison method

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Reference no: EM131021652

Tom is considering purchasing a $ 20 000 car. After five years, he will be able to sell the vehicle for $ 10 000. Petrol costs will be $ 2 000 per year, insurance $600 per year, and parking $ 600 per year. Maintenance costs for the first year will be $1 000, rising by $ 400 per year thereafter. The alternative is for Tom to take taxis everywhere. This will cost an estimated $ 9 000 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, should he buy the car under the stated assumptions? Use an annual worth comparison method.

Reference no: EM131021652

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