(LG 7.4) Gerry likes driving small cars and buys nearly identical ones when- ever the old one needs replacing. Typically, he trades in his old car for a new one costing about $15 000. A new car warranty covers all repair costs above standard maintenance (standard maintenance costs are constant over the life of the car) for the first two years. After that, his records show an average repair expense (over standard maintenance) of $2500 in the third year (at the end of the year), increasing by 50 percent per year thereafter. If a 30 percent declining- balance depreciation rate is used to estimate salvage values and interest is 8 percent, how often should Gerry get a new car?

(LG 7.4) Gerry likes driving small cars and buys nearly identical ones when- ever the old one needs replacing. Typically, he trades in his old car for a new one costing about $15 000. A new car warranty covers all repair costs above standard maintenance (standard maintenance costs are constant over the life of the car) for the first two years. After that, his records show an average repair expense (over standard maintenance) of $2500 in the third year (at the end of the year), increasing by 50 percent per year thereafter. If a 30 percent declining- balance depreciation rate is used to estimate salvage values and interest is 8 percent, how often should Gerry get a new car?

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter7: Credit Cards And Consumer Loans

Section: Chapter Questions

Problem 1FPC

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Gerry likes driving small cars and buys nearly identical ones whenever the old one needs replacing. Typically, he trades in his old car for a new one costing about $15 000. A new car warranty covers all repair costs above standard maintenance (standard maintenance costs are constant over the life of the car) for the first two years. PART A: After two years, his records show an average repair expense (over standard maintenance) of $2500 in the third year (at the end of the year), increasing by 50 percent per year thereafter. If a 30 percent declining-balance depreciation rate is used to estimate salvage values and interest is 8 percent, how often should Gerry get a new car with this cost in the third year? PART B: After two years, his records show an average repair expense (over standard maintenance) of $1500 in the third year (at the end of the year), increasing by 50 percent per year thereafter. If a 30 percent declining-balance depreciation rate is used to estimate salvage values…
Hh1. Account Gerry likes driving small cars and buys nearly identical ones whenever the old one needs replacing. Typically, he trades in his old car for a new one costing about $16,000. A new car warranty covers all repair costs above standard maintenance (standard maintenance costs are constant over the life of the car) for the first two years. After that, his records show an average repair expense (over standard maintenance) of $2600 in the third year (at the end of the year). increasing by 50 percent per year thereafter. If a 30 percent declining-balance depreciation rate is used to estimate salvage values and interest is 9 percent, how often should Gerry get a new car?
Tom paid $2,250 for a new car when he was young. Today, 41 years later, a similar type of new car costs $18,500. Based on this example, what is the inflation rate for cars? 12.10% 2.14% 5.27% 17.62% 6.83%
A friend claims they purchased a new car for car for $15,000. A similar car that you purchased was only $11,500 in the same year. Which sentence best compares the prices? a.Your friend paid 30.4% more for their car. b.You paid 30.4% less for your car compared to your friend. c.Your friend paid 23% more for their car. d.Your friend paid $3500 more for their car per $1 you spent. e.For every $1 your friend paid, you spent 30.4% less.
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Bill’s father read that each year a car’s value declines by 10%. He also read that a new car’s value declines by 12% as it is driven off the dealer’s lot. Maintenance costs and the costs of “car problems” are only $200 per year during the 2-year warranty period. Then they jump to $750 per year, with an annual increase of $500 per year. Bill’s dad wants to keep his annual cost of car ownership low. The car he prefers cost $30,000 new, and he uses an interest rate of 8%. For this car, the new vehicle warranty is transferrable. (a) If he buys the car new, what is the minimum cost life? What is the minimum EUAC? (b) If he buys the car after it is 2 years old, what is the minimum cost life? What is the minimum EUAC? (c) If he buys the car after it is 4 years old, what is the minimum cost life? What is the minimum EUAC? (d) If he buys the car after it is 6 years old, what is the minimum cost life? What is the minimum EUAC? (e) What strategy do you recommend? Why?
Patricia finances a $49,100 car with annual payments at a 3.10% interest rate over 8 years, at which time the car will have zero value. If she wants to sell the car in 2 years, how much does she need to sell the car for to break even? a.$6,955 b.$42,145 c.$5,655 d.$51,838 e.$37,925
After visiting several automobile dealerships, Richard selects the used car he wants. He likes its $12,900 price, but financing through the dealer is no bargain. He has $2,500 cash for a down payment, so he needs an $10,400 loan. In shopping at several banks for an installment loan, he learns that interest on most automobile loans is quoted at add-on rates. That is, during the life of the loan, interest is paid on the full amount borrowed even though a portion of the principal has been paid back. Richard borrows $10,400 for a period of four years at an add-on interest rate of 10 percent. What is the total interest on Richard’s loan? Note: Do not round intermediate calculations. Round your answer to the nearest whole number. What is the total cost of the car? Note: Do not round intermediate calculations. Round your answer to the nearest whole number. What is the monthly payment? Note: Do not round intermediate calculations. Round your answer to the nearest whole number.…