Stan Buys a 1966 Mustang with the Intention of Repairing

question 79

Essay

Stan buys a 1966 Mustang with the intention of repairing, restoring and selling it.He anticipates that it will cost him $10 000 to purchase, repair and restore the car, and that he can sell the finished car for $13 000.When he has spent a total of $10 000 on the project, he discovers that he needs to replace the engine.It will cost Stan $4000 to replace the engine.He can sell the car without the new engine for $9000.What should he do?

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Definitions:

Compounded Monthly

The method of computing interest that includes both the original amount of money deposited or loaned and the interest that amount has earned in past months.

Amortized

The process of spreading payments over multiple periods, typically in context of a loan or mortgage, which includes both interest and principal components.

Compounded Semi-annually

Refers to the process where interest is calculated and added to the principal balance of an investment or loan twice a year.

Amortized

The process of spreading out a loan into a series of fixed payments over time.