A BMW costs $35 000, its salvage value declines by declining-balance depreciation of 10% per year, and its maintenance costs are $100 in the first year and go up by $500 a year. Carol and Sam both like to drive BMWSS. Carol trades her car in for a new model every year, whereas Sam keeps his until it reaches its economic life, then trades it in. Carol and Sam both have MARRS of 5%. How much more does Carol pay for her car per year, on average, than Sam?

A BMW costs $35 000, its salvage value declines by declining-balance depreciation of 10% per year, and its maintenance costs are $100 in the first year and go up by $500 a year. Carol and Sam both like to drive BMWSS. Carol trades her car in for a new model every year, whereas Sam keeps his until it reaches its economic life, then trades it in. Carol and Sam both have MARRS of 5%. How much more does Carol pay for her car per year, on average, than Sam?

Personal Finance

13th Edition

ISBN:9781337669214

Author:GARMAN

Publisher:GARMAN

Chapter8: Vehicle And Other Major Purchases

Section: Chapter Questions

Problem 1FPC

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