You're thinking of buying a car to travel around in, rather than paying $2,788 at the end of every year to use the train. You can buy an old second hand car for $5,000 now (t=0), and sell it after 14 years for $3,500 (t=14). You estimate that the car will cost $5,500 per year in fuel, insurance, registration and maintenance, paid in arrears, so there will be 14 payments from t=1 to t=14 inclusive. The required return is 13% pa. Select the most correct statement. The equivalent annual cost (EAC) of the car is: Select one: O a. $6,040 so the train is cheaper than the car. O b. $6,193 so the train is cheaper than the car. $6,293 so the train is cheaper than the car. O c. O d. $12,455 so the train is cheaper than the car. O e. $39,031 so the train is cheaper than the car.
You're thinking of buying a car to travel around in, rather than paying $2,788 at the end of every year to use the train. You can buy an old second hand car for $5,000 now (t=0), and sell it after 14 years for $3,500 (t=14). You estimate that the car will cost $5,500 per year in fuel, insurance, registration and maintenance, paid in arrears, so there will be 14 payments from t=1 to t=14 inclusive. The required return is 13% pa. Select the most correct statement. The equivalent annual cost (EAC) of the car is: Select one: O a. $6,040 so the train is cheaper than the car. O b. $6,193 so the train is cheaper than the car. $6,293 so the train is cheaper than the car. O c. O d. $12,455 so the train is cheaper than the car. O e. $39,031 so the train is cheaper than the car.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Transcribed Image Text:You're thinking of buying a car to travel around in, rather than paying $2,788 at the end of every year to use the
train. You can buy an old second hand car for $5,000 now (t=0), and sell it after 14 years for $3,500 (t=14). You
estimate that the car will cost $5,500 per year in fuel, insurance, registration and maintenance, paid in arrears, so
there will be 14 payments from t=1 to t=14 inclusive. The required return is 13% pa. Select the most correct
statement. The equivalent annual cost (EAC) of the car is:
Select one:
O a.
$6,040 so the train is cheaper than the car.
O b.
O c.
$6,193 so the train is cheaper than the car.
$6,293 so the train is cheaper than the car.
O d. $12,455 so the train is cheaper than the car.
Oe. $39,031 so the train is cheaper than the car.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education