A car is needed for three years. Plans A and B for acquiring the car are being evaluated. An effective annual interest rate of 10% is to be used. Which plan is economically superior? Plan A: Lease the car for $0.25/mile (all inclusive) Plan B: Purchase the car for $30,000. Keep the car for three years. Sell the car after three years for $7200. Pay $0.14 per mile for oil and gas. Pay other costs of $500 per year.
A car is needed for three years. Plans A and B for acquiring the car are being evaluated. An effective annual interest rate of 10% is to be used. Which plan is economically superior? Plan A: Lease the car for $0.25/mile (all inclusive) Plan B: Purchase the car for $30,000. Keep the car for three years. Sell the car after three years for $7200. Pay $0.14 per mile for oil and gas. Pay other costs of $500 per year.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A car is needed for three years. Plans A and B for acquiring the car are being evaluated. An effective annual interest rate of 10% is to be used. Which plan is economically superior?
Plan A: Lease the car for $0.25/mile (all inclusive)
Plan B: Purchase the car for $30,000. Keep the car for three years. Sell the car after three years for $7200. Pay $0.14 per mile for oil and gas. Pay other costs of $500 per year.
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