u are looking for a car and have narrowed it down to two options. You can...

u are looking for a car and have narrowed it down to two options. You can buy a new car at a cost of $23,995, which has estimated life of 12 years and annual maintenance costs of $750 per year. Your second option is a used car at a cost of $14,225, with an estimated remaining life of 7 years and annual maintenance costs of $1800 per year. Which is the cheaper option, given your borrowing cost of 7%?

Solutions

Expert Solution

Cheaper option : New Car; Because equivalent annual cost of new car is less than old car.

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -

jeff jeffy answered 1 year ago

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