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I have no idea how to do this!
You have an old car worth $9,000 if sold today. You could overhaul this car at a cost of $5,000, and it would last you about 6 more years at which time you could sell it for $1,000. Alternately, you could purchase a new car. It would cost $22,000 and would last you approximately 6 years. After 6 years it would be worth $3,000. Your cost of funds is 10%. Prepare an evaluation of your choices. Show your work and indicate which of the alternatives you would choose.
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Separate each car and the numbers
Cost of each car NOW Cost of any additional costs ( repairs) Cost of use of money( interest) Minus the value of the car at the end of 6 years. ** but tell the teacher it is a bad car if a new one only lasts 6 years, tell her to buy a Ford. |
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