Answer the Following Questions Using the Information Below:
John's 8-Year-Old

question 197

Multiple Choice

Answer the following questions using the information below:
John's 8-year-old Chevrolet Trail Blazer requires repairs estimated at $6,000 to make it roadworthy again. His wife, Sherry, suggested that he should buy a 5-year-old used Jeep Grand Cherokee instead for $6,000 cash. Sherry estimated the following costs for the two cars:
$\begin{array}{lrr}&\text { Trail Blazer }&\text { Grand Cherokee }\\\text { Acquisition cost } & \$ 25,000 & \$ 6,000 \\\text { Repairs } & \$ 6,000 & - \\\text { Annual operating costs } & & \\\text { (Gas, maintenance, insurance) } & \$ 2,280 & \$ 2,100\end{array}$
-The cost NOT relevant for this decision is the ________.

• A) acquisition cost of the Trail Blazer
• B) acquisition cost of the Grand Cherokee
• C) repairs to the Trail Blazer
• D) annual operating costs of the Grand Cherokee

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Definitions:

Invested Sum

The total amount of money allocated towards an investment or project.

Discount Factor

The discount factor is a multiplier that adjusts the future value of a cash flow to its present value, reflecting the time value of money.

Discount Rate

The applied rate in discounted cash flow studies for turning future cash flows into their equivalent present-day financial value.

Cash Inflows

Money received by a business from its operations, investments, or financing activities.