What is the real annuity equivalent for the new car

Assignment Help Business Economics

Reference no: EM131094745

Suppose you wish to buy a car today. You have two choices, buy a new car for $10,000 or buy a used car for $6,000. The new car has an economic life of 6 years and you expect that it can be sold at the end of 6 years for $2,000. If you buy the used car, you plan to sell it in 3 years and expect to receive $600. Also, you expect that the used car will require $400 more a year than the new car for maintenance. Assume your marginal tax rate equal to zero. If your opportunity cost of capital is 10%, would you choose the new or used car?

What is the Net Present Value for the new car?

A. -$2,631

B. -$8,871

C. -$6,544

D. -$2,037

E. None of the above

ENTER RESPONSE HERE:

What is the real annuity equivalent for the new car?

A. -$2,631

B. -$8,871

C. -$6,544

D. -$2,037

E. None of the above

ENTER RESPONSE HERE:

What is the present value for the used car?

A. -$2,631

B. -$8,871

C. -$6,544

D. -$2,037

E. None of the above

ENTER RESPONSE HERE:

What is the real annuity equivalent for the used car?

A. -$2,631

B. -$8,871

C. -$6,544

D. -$2,037

E. None of the above

ENTER RESPONSE HERE:

It is cheaper to buy the used car?

A. True

B. False

ENTER RESPONSE HERE:

Reference no: EM131094745

Questions Cloud

Discuss major issue that has arisen with bond issuances : Discuss a major issue that has arisen with bond issuances in recent years. State your position on the solvency of the market going forward.

The quantity demanded and changes-shifts in demand : What are the differences between “the quantity demanded” and “changes/shifts in demand?” What exactly are the ceteris paribus variables? Identify five such variables in the demand for Lexus automobiles and explain how those might shift the demand cur..

Economy for all possible values of the initial endowments : Consider an exchange economy with two consumers and two goods. The consumption sets of the consumers are R2+. Each consumer has the same utility function u(x1, x2) = min{x1, x2}. Provide a complete characterization of all the allocations which are in..

What was her estimate for the marginal propensity to consume : In 2009, the Chair of the President's Council of Economic Advisors Christina Romer delivered a report outlining the expected impact of the American Recovery and Reinvestment Act. Her research suggested that the fiscal multiplier for increased governm..

What is the real annuity equivalent for the new car : Suppose you wish to buy a car today. You have two choices, buy a new car for $10,000 or buy a used car for $6,000. The new car has an economic life of 6 years and you expect that it can be sold at the end of 6 years for $2,000. If you buy the used ca..

Terms of the role of marriage in society : According to Coontz, what is most distinctive about the current period in history in the western world compared to most others in terms of the role of marriage in society?

Is kazhiloti liable for trademark infringement : Zura Kazhiloti sold jewelry bearing the luxury brand names “Cartier” and “Van Cleef & Arpels” to jewelry stores. The retailers then sold the jewelry through their brick and mortar stores, through websites, and through the Internet auction site eBay. ..

Evaluate the effectiveness of the training experience : Training is maximized when leaders set clear expectations for learners, use techniques for reinforcing learning during training, and take steps to ensure that the desired performance is maintained after training. First, briefly describe one of your j..

Higher steady-state growth rate of total output : In a slow growth model of an economy with population growth but no technological change, which of the following will generate a higher steady-state growth rate of total output?

User Account

All Pages