Because of Its Age, Your Car Costs $4,000 Annually in Maintenance

question 34

Multiple Choice

Because of its age, your car costs $4,000 annually in maintenance expense.You could replace it with a newer vehicle costing $8,000.Both vehicles would be expected to last four more years.If your opportunity cost is 8 percent, by how much must maintenance expense decrease on the newer vehicle to justify its purchase?

• A)$1,250
• B)$1,585
• C)$2,000
• D)$2,415

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Definitions:

Unilateral Contract

A contract in which one party makes a promise in exchange for an act by another party.

Bilateral Contract

An agreement between two parties where each party makes a promise to the other, with obligations and benefits on both sides.

Express Contract

A contract in which the terms of the agreement are explicitly stated by the parties, either verbally or in writing.

ESIGN

The Electronic Signatures in Global and National Commerce Act, a federal law that facilitates the use of electronic records and signatures in interstate and foreign commerce.