Identify the settlement zone for the following situation. Provide a detailed exp

Question

Identify the settlement zone for the following situation. Provide a detailed explanation of how you arrived at the numbers.

Mindy is in the market for a new SUV when she visited the showroom of Happy Motors. Mindy saw an SUV that she liked that had a sticker price of $18,900. Mindy had done her homework before she visited Happy Motors and determined that she could only pay $2,000 down and $300 to $350 a month for three years (although she was willing to pay over four years). Happy Motors expects to sell its vehicle for about 5 percent below the sticker price ($17,955) although they could go down another 5 percent of the sticker price ($17,010). 250 word count

Explanation / Answer

Situation 1:

If Mindy is going to pay a sum of 2000$ as down payment and 350$ as monthly payment for 3 Yrs

Total amount paid for 3 yrs = 2000 (Initial Payment) + 350 × 12 × 3

= 2000 + 12600 = 14600

= 14600                 < 17955[Actual Price – As the Happy motors sell @ 5% below sticker price]

                                < 17010 [Discounted Price]

[Here at the end of 3rd year she could settle 14600$ only, despite the Happy motor have given her 10% discount i.e. 5% + 5%: She could not repay, hence she can’t afford the SUV]

Situation 2:

Case 1: If Mindy is going to pay a sum of 2000$ as down payment and 350$ as monthly payment for 4 Yrs.

[i] Total amount paid for 4 yrs     = 2000 (Initial Payment) + 350 × 12 × 4   

= 2000 +16800 = 18800

= 18800                 >17955 [Actual Price – As the Happy motors sell @ 5% below sticker price]

>17010 [Discounted Price]

Case 2: If Mindy is going to pay a sum of 2000$ as down payment and 333$ as monthly payment for 4 Yrs.

[Considering no 5% additional discount was provided.]

[ii] Total amount paid for 4 yrs    = 2000 (Initial Payment) + 333 × 12 × 4

= 2000 + 15984 = 17984

=17984                  >17955 [Actual Price – As the Happy motors sell @ 5% below sticker price]

>17010 [Discounted Price]

Case 3: If Mindy is going to pay a sum of 2000$ as down payment and 314$ as monthly payment for 4 Yrs.

[Considering 5% additional discount was provided.]

[iii] Total amount paid for 4 yrs = 2000 (Initial Payment) + 314 × 12 × 4

= 2000 + 15072 = 17072

=17072 >17010 [Discounted Price]

Therefore, if Mindy is planning to buy SUV,

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