Reference no: EM132723648

Tom is considering purchasing a £24,000 car. After five years, he will be able to sell the vehicle for £7,500. Petrol costs will be £1,900 per year, insurance £700 per year, and parking £700 per year. Maintenance costs will be £900, rising by £400 per year thereafter.

• The alternative is for Tom to take taxis everywhere. This will cost an estimated £7,000 per year. Tom will rent a vehicle each year at a total cost (to year-end) of £700 for the family vacation, if he has no car. If Tom values money at 10% annual interest, should he buy the car? Use an annual worth comparison method {Perform all calculations using 5 significant figures and round any monetary answers to the nearest cent}.

Question 1: The annual cost of operating an Auto is: ____________

Question 2: The annual cost of using taxis as an alternative is: ____________

Question 3: Which option should Tom take (enter either 'Auto' or 'Taxi'?