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:

Operating Plan

A document outlining the steps and resources required to achieve organizational goals within a specific timeframe.

Sole Proprietorship

A business owned and operated by a single individual, with no distinction between the business and the owner.

Business Debts

Financial obligations that a business owes to creditors, which can include loans, bonds, and other forms of borrowing.

Liability

A legal obligation or responsibility that can be enforced by law, typically involving debts or financial obligations.