Question

Jeff is the owner of a small grocery store and is considering buying a car to...

Jeff is the owner of a small grocery store and is considering buying a car to help him transport his wares. He has found a suitable used car online that he was able to negotiate to a price of $40,000. After doing a bit more research, he has found the following additional expenses involved in the purchase:

  • Insurance and registration will cost $510 per year, payable at the start of each year
  • Based on mileage estimates, petrol will cost $220 per fortnight, payable at the end of each fortnight
  • Servicing will cost $380 per year, payable at the end of each year (as the car was recently serviced by the previous owner

Assume that these are the only expenses involved with the purchase and operation of the car.

Geoffrey believes that the car can be used for 5 years before it will no longer be reliable, at which point he expects to sell it for a quarter of its current purchase price. He also has a business account at the bank that lets him borrow or invest money at 4.6% per annum effective.

(a) Calculate the present value of the running costs (i.e. the insurance and registration, the petrol, and the servicing).

please show working out if possible

Homework Answers

Answer #1

Present value of running costs= $29,589.24

Calculations as below:

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Geoffrey is the owner of a small grocery store, and is considering buying a car to...
Geoffrey is the owner of a small grocery store, and is considering buying a car to help him transport his wares. He has found a suitable used car online that he was able to negotiate to a price of $26,000. After doing a bit more research, he has found the following additional expenses involved in the purchase: Insurance and registration will cost $530 per year, payable at the start of each year Based on mileage estimates, petrol will cost $220...
Geoffrey is the owner of a small grocery store, and is considering buying a car to...
Geoffrey is the owner of a small grocery store, and is considering buying a car to help him transport his wares. He has found a suitable used car online that he was able to negotiate to a price of $33,000. After doing a bit more research, he has found the following additional expenses involved in the purchase: Insurance and registration will cost $430 per year, payable at the start of each year Based on mileage estimates, petrol will cost $300...
Geoffrey is the owner of a small grocery store, and is considering buying a car to...
Geoffrey is the owner of a small grocery store, and is considering buying a car to help him transport his wares. He has found a suitable used car online that he was able to negotiate to a price of $37,000. After doing a bit more research, he has found the following additional expenses involved in the purchase: Insurance and registration will cost $470 per year, payable at the start of each year Based on mileage estimates, petrol will cost $220...
Geoffrey is the owner of a small grocery store and is considering buying a car to...
Geoffrey is the owner of a small grocery store and is considering buying a car to help him transport his wares. He has found a suitable used car online that he was able to negotiate to a price of $40,000. After doing a bit more research, he has found the following additional expenses involved in the purchase: • Insurance and registration will cost $510 per year, payable at the start of each year • Based on mileage estimates, petrol will...
Geoffrey is the owner of a small grocery store and is considering buying a car to...
Geoffrey is the owner of a small grocery store and is considering buying a car to help him transport his wares. He has found a suitable used car online that he was able to negotiate to a price of $40,000. After doing a bit more research, he has found the following additional expenses involved in the purchase: • Insurance and registration will cost $510 per year, payable at the start of each year • Based on mileage estimates, petrol will...
Geoffrey is the owner of a small grocery store, and is considering buying a car to...
Geoffrey is the owner of a small grocery store, and is considering buying a car to help him transport his wares. He has found a suitable used car online that he was able to negotiate to a price of $40,000. After doing a bit more research, he has found the following additional expenses involved in the purchase: Insurance and registration will cost $510 per year, payable at the start of each year Based on mileage estimates, petrol will cost $220...
Geoffrey decides not to buy the car mentioned earlier. Instead, he is now considering a food...
Geoffrey decides not to buy the car mentioned earlier. Instead, he is now considering a food delivery service "You, bars, meats" that his friend Gillian has recently started. Gillian has agreed that for a single payment of $64,000 today to help her launch her business, she will provide all the delivery services that Geoffrey needs for his business for the next 5 years. Geoffrey is considering borrowing the full amount from his business account. Suppose that Geoffrey makes level quarterly...
Geoffrey decides not to buy the car mentioned earlier. Instead, he is now considering a food...
Geoffrey decides not to buy the car mentioned earlier. Instead, he is now considering a food delivery service "You, bars, meats" that his friend Gillian has recently started. Gillian has agreed that for a single payment of $66,000 today to help her launch her business, she will provide all the delivery services that Geoffrey needs for his business for the next 5 years. Geoffrey is considering borrowing the full amount from his business account. Suppose that Geoffrey makes level quarterly...
A football club is considering buying a player on 1st January for $ 20 million The...
A football club is considering buying a player on 1st January for $ 20 million The player;s wages will be $ 15,000.00 per month higher than those of the man he will replace. The Manager expects the purchase to generate a level increase in attendance, which will yield an extra income in the first year of $ 90,000.00 from each home match. The manager also expects the new player to increase the club's chance of reaching the Cup Final in...
Murphy Construction is considering buying a new crane. It will cost $200,000. They will pay $50,000...
Murphy Construction is considering buying a new crane. It will cost $200,000. They will pay $50,000 to have it modified and delivered. It has a five-year class life. At the end of three years, they plan to sell the machine for $100,000. The new machine will allow MC to increase revenues by $90,000 each year and expenses will increase by $10,000 each year. Inventory will increase by $3,000 if the machine is purchased, accounts payable will decrease by $1,000 and...