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Homework answers / question archive / University of MalayaCHEMICAL E kek You have just moved to a new country to take up a two-year assignment

University of MalayaCHEMICAL E kek You have just moved to a new country to take up a two-year assignment

Economics

University of MalayaCHEMICAL E kek

You have just moved to a new country to take up a two-year assignment. You need to buy a car and are deciding between a new one that costs $20,000 and a three-year-old one that costs $9,000. The used car has an odometer reading of 25,000 miles. You have $10,000 in savings, and can borrow the rest from your company, repaying them 110% after two years. The value of the new car will depreciate by 50% in two years, while that of the used car will depreciate by one-third.

What should you do? Use the seven-step procedure from Table 1-1 to analyze your situation. Identify the principles that accompany each step.
 

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Answer:

according to the given scanerio

Car cost == $ 20,000

Depreciation = 50%

The value of the car after 2 years will be $ 10,000

The amount will be borrowed from the company if the new car is = $ 10,000

Interest payable to the business after 2 years = P × R × T / 100 = 10,000 × 10 × 2/100 = $ 2,000

Total amount payable to the business after 2 years = $ 12,000

Now the total liability will be 10,000 + 12,000 = $ 22,000

For second hand car

Cost = $ 9000

Depreciation = 1/3

The value of the car will be $ 6000 after 2 years.

The responsibility will be $ 3000

The responsibility is more in buying a new car than buying an old car, so we should buy the old car.

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