Question

You are planning to buy a used car. The cost of the used car is $2,500. You plan to keep the car for seven years, and estimate that annual maintenance will be $250. Given that it is a very old car, you estimate that every three years, you will need $800 for an overhaul. At the end of seven years, you can sell the car for $450.

Complete the following cash flow table for your new car.

Enter your answer as follow: -1234 for negative value; 1234 for positive value.

Year	Cash Flow
0
1
2
3
4
5
6
7

Answer 1

• Answer: Assuming I don't have any balance here. I am buying used car at cost $2500 so cost will be shown as cash outflow at year 0.
• Cost of manitainance would be considered as the cash out-flow so it would be enter with negative sign in the table for all years 1 to 7.
• Overhauling is practicing in earch three years, I am assuming that car at the time of buying was overhauled. So next overhauling years are 3 and 6. so I have added $ -800 in each year 3 and 6 with the given maintainance cost.
• I can recover $450 by selling my car, so this money would be considered as the cash inflow . Hence I have added this income with $ -250 for year 7 which gives $200 to me.

Year	Cash Flow
0	-2500
1	-250
2	-250
3	-1050
4	-250
5	-250
6	-1050
7	200