(Table: Car Costs) the Table Shows the Initial Cost Outlays

question 34

Multiple Choice

(Table: Car Costs) The table shows the initial cost outlays of two versions of the Ford Escape and their estimated annual fuel costs. Stu is not sure whether he wants the hybrid or standard model. Although more expensive, the hybrid model has better gas mileage and would save $890 of gas per year. Assume both cars are worthless after six years. At a 7% interest rate, what should Stu do?

• A) Buy the hybrid since the net present value of the total cost for the hybrid is less than the standard.
• B) Buy the standard since the net present value of the total cost for the standard is less than the hybrid.
• C) Buy the standard model since the net present value of the total cost for the standard is more than the hybrid.
• D) Buy either model since the net present value of the cost difference between the hybrid and the standard model is zero.

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Definitions:

Fact

A statement that can be proven to be true or false, typically based on real occurrences or empirical evidence.

Fraudulent Misrepresentation

A false statement made knowingly or recklessly with the intent to deceive, leading to damages to another party.

Building Leaks

Water intrusion problems within a structure's envelope, causing damage and potential health issues due to moisture.

Dram Shop Act

A state statute that imposes liability on the owners of bars and taverns, as well as those who serve alcoholic drinks to the public, for injuries resulting from accidents caused by intoxicated persons when the sellers or servers of alcoholic drinks contributed to the intoxication.