For Ruth, one of the most exciting aspects of landing a full-time job was being able to buy a different car! Even though she will be working in an urban area, she will need a reliable vehicle to travel to client locations outside the city. Ruth is trying to decide if she should buy a new vehicle or a slightly used vehicle, or lease a new(er) vehicle. She has had her eye on a dazzling blue SUV; it stares at her every time she drives by the lot. But she's not sure if she can justify its cost. Here are the costs and benefits she has gathered for each of these options: Buy New Buy Used Lease Midnight-Blue SUV Monthly payment $550 $350 $320 plus $2 per mile if over 10,000 miles per year Time frame 6 years 4 years 2 years Warranty Excellent for 100,000 miles Excellent for next 40,000 miles Excellent for length of lease only Full coverage insurance $215 per month $160 per month Operating cost $0.20 per mile $0.20 per mile Expected mileage per 13,800 13,800 $195 per month $0.20 per mile 13,800 year Safety features Maximum Moderate Maximum (a) Identify the relevant costs associated with each of Ruth's three options. (Round answers to 2 decimal places, e.g. 15.25.) Buy New Buy Used Lease Midnight Blue SUV Total average monthly cost +A +A $
For Ruth, one of the most exciting aspects of landing a full-time job was being able to buy a different car! Even though she will be working in an urban area, she will need a reliable vehicle to travel to client locations outside the city. Ruth is trying to decide if she should buy a new vehicle or a slightly used vehicle, or lease a new(er) vehicle. She has had her eye on a dazzling blue SUV; it stares at her every time she drives by the lot. But she's not sure if she can justify its cost. Here are the costs and benefits she has gathered for each of these options: Buy New Buy Used Lease Midnight-Blue SUV Monthly payment $550 $350 $320 plus $2 per mile if over 10,000 miles per year Time frame 6 years 4 years 2 years Warranty Excellent for 100,000 miles Excellent for next 40,000 miles Excellent for length of lease only Full coverage insurance $215 per month $160 per month Operating cost $0.20 per mile $0.20 per mile Expected mileage per 13,800 13,800 $195 per month $0.20 per mile 13,800 year Safety features Maximum Moderate Maximum (a) Identify the relevant costs associated with each of Ruth's three options. (Round answers to 2 decimal places, e.g. 15.25.) Buy New Buy Used Lease Midnight Blue SUV Total average monthly cost +A +A $
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Transcribed Image Text:For Ruth, one of the most exciting aspects of landing a full-time job was being able to buy a different car! Even though she will be
working in an urban area, she will need a reliable vehicle to travel to client locations outside the city. Ruth is trying to decide if she
should buy a new vehicle or a slightly used vehicle, or lease a new(er) vehicle. She has had her eye on a dazzling blue SUV; it stares at
her every time she drives by the lot. But she's not sure if she can justify its cost.
Here are the costs and benefits she has gathered for each of these options:
Buy New
Buy Used
Lease Midnight-Blue SUV
Monthly payment
$550
$350
$320 plus $2 per mile if
over
10,000 miles per year
Time frame
6 years
4 years
2 years
Warranty
Excellent for 100,000
miles
Excellent for next 40,000 miles
Excellent for length of lease
only
Full coverage insurance
$215 per month
$160 per month
Operating cost
$0.20 per mile
$0.20 per mile
Expected mileage per
13,800
13,800
$195 per month
$0.20 per mile
13,800
year
Safety features
Maximum
Moderate
Maximum
(a)
Identify the relevant costs associated with each of Ruth's three options. (Round answers to 2 decimal places, e.g. 15.25.)
Buy New
Buy Used
Lease Midnight Blue SUV
Total average monthly
cost
+A
+A
$
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