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

question 40

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 4 more years,at which point they will be valueless.If your opportunity cost is 8%,by how much must maintenance expense decrease on the newer vehicle to justify its purchase?

• A) $1,625.40
• B) $1,584.63
• C) $1,469.08
• D) $1,409.54

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Definitions:

Traditional IRA

A type of retirement account allowing individuals to direct pre-tax income toward investments, with taxes deferred until withdrawal.

Roth IRA

An individual retirement account allowing a person to set aside after-tax income up to a specified amount each year, with earnings being tax-free.

Deductible Contribution

A contribution or payment that can be subtracted from gross income to reduce taxable income, often related to charity or retirement savings.

Non-working Spouse

A spouse who does not engage in regular paid employment outside the home.