Antonio and his wife Alessia are considering the purchase of a new car and have decided that estimating its cash flows will help them in their decision process. They expect to have a disposable annual income of €18,000. Their cash flows estimates for the car purchase are as follows:

Using these cash flow estimates, calculate the following:

a. The initial investment

b. Operating cash flow

c. Terminal cash flow

d. Summary of annual cash flow

e. Based on their disposable annual income, what advice would you give Antonio and Alessia regarding the proposed car purchase?

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Negotiated price of the new car Sales tax rate (VAT rate applicable to purchase price) Car trade-in Estimated value of new car in four years Estimated monthly repair and maintenance Estimated monthly parking fee 52,000 20.0% 0 12,000 200 100