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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. 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.
Expert Solution
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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