Saturday, September 3, 2011

What should Jim do. What are his savings in the first year.


Multiple Choice

Jim’s 5-year-old Geo Prizm requires repairs estimated at $3,000 to make it roadworthy again. His friend, Julie, suggested that he should buy a 5-year-old used Honda Civic instead for $3,000 cash. Julie estimated the following costs for the two cars:

Geo Prizm Honda Civic

Acquisition cost $15,000 $3,000

Repairs $ 3,000 ---

Annual operating costs

(Gas, maintenance, insurance) $ 2,280 $2,100

What should Jim do? What are his savings in the first year?

a. Buy the Honda Civic; $9,780

b. Fix the Geo Prizm; $5,518

c. Buy the Honda Civic; $180

d. Fix the Geo Prizm; $5,280

Click here for the SOLUTION

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