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

question 112

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 8,000 = Annuity

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Definitions:

Remedies

Legal means for enforcing a right or redressing a wrong, including monetary damages and specific performance.

Parol Evidence Rule

A legal principle that prevents parties in a contract dispute from presenting evidence of prior or concurrent oral agreements that would contradict the written terms of the contract.

Rent

The payment made by a tenant to a landlord for the use of a property, room, or apartment for a designated period.

Profits

The financial gain derived from a business activity after deducting expenses.