What is the annual capital recovery cost

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Question - Your sister just bought a new car having a sticker price (manufacturer's suggested retail price) of 36,000. She was crafty and was able to negotiate a sales price of 33,500 from the auto dealership. In addition, she received 4,5000 for here old trade-in car under the U.S. government's "Cash for Clunkers" program. If her new car will have a resale value of 3,5000 after seven years when your sister will shop for a replacement car, what is the annual capital recovery cost of your sister's purchase? The relevant interest rate is 8% per year, and your sister can afford to spend a maximum of 5,000 per year to finance the car (operating and other costs are extra).

Reference no: EM132091135

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