Because of its age, your car costs $4,000 annually in maintenance expense. you could replace it with a newer vehicle costing $8,000. both vehicles would be expected to last 4 more years, at which point they will be valueless. if your opportunity cost is 8%, by how much must maintenance expense decrease on the newer vehicle to justify its purchase?
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Ответ:
C$ 2,415.37
The newer vehicle should decrease maintenance cost by 2,415.37 or more to justify its purchase.
Explanation:
The annual maintenance expense will be for 4 years
we will compare the cost saving with the $8,000 cost for the new car.
So we need calculate the cuota of an annuity of 4 years at 8% discount with a present value of 8,000
PV $8,000.00
time4
rate0.08
C$ 2,415.37
The cost savings should decrease for at least 2,415.37 to make it a economic viable option
Ответ:
- 15.75%
Explanation:
The computation of the rate of return on his investment is shown below:
= (Year end investment value - investment value + annual dividend) ÷ (Investment value)
= ($2,000 - $2,400 + $22) ÷ ($2,400)
= -$378 ÷ 2,400
= - 15.75%
Simply we divided the difference of investment and added the annual dividend and then divided it by the investment value