QUESTION 9 A family now has four kids, and their subcompact car just isn\'t big
ID: 1159803 • Letter: Q
Question
QUESTION 9 A family now has four kids, and their subcompact car just isn't big enough for the kids and dog. They don't have a lot of money, so they will buy a used vehicle. They have three mutually exclusive options listed beloW. Assuming that the vehicles are available in the future with the same associated costs, choose a vehicle to buy using the annual worth (AW) method assuming that 9% Minivan B $4,500 $2,500 SUV C $8,000 $2,600 Crossover A Purchase Price $10,000 Yearly Maintenance, Gas $2,000 Cost, Insurance, eto. Salvage Expected Use in Years $5,700 $2,000 4,000Explanation / Answer
Calculate the annual worth of Crossover A -
Annual worth = -$10,000 (A/P, 9%, 5) - $2,000 + $5,700(A/F, 9%, 5)
Annual worth = (-$10,000 * 0.25709) - $2,000 + ($5,700 * 0.16709)
Annual worth = -$2,570.9 - $2,000 + $952.41
Annual worth = -$3,618.49
So,
The annual worth of crossover A is -$3,618.49
Calculate the annual worth of Minivan B -
Annual worth = -$4,500(A/P, 9%, 3) - $2,500 + $2,000(A/F, 9%, 3)
Annual worth = (-$4,500 * 0.39505) - $2,500 + ($2,000 * 0.30505)
Annual worth = -$1,777.72 - $2,500 + $610.1
Annual worth = -$3,667.62
The annual worth of Minivan B is -$3,667.62
Calculate the annual worth of SUVC
Annual worth = -$8,000(A/P, 9%, 6) - $2,600 + $4,000(A/F, 9%, 6)
Annual worth = (-$8,000 * 0.22292) - $2,000 + ($4,000 * 0.13292)
Annual worth = -$1,783.36 - $2,000 + $531.68
Annual worth = -$3,251.68
The annual worth of SUVC is -$3,251.68
The annual worth of SUV C is numerically highest.
So,
The familly should buy SUVC.
Hence, the correct answer is the option (d).
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