You're thinking of buying a car to travel around in, rather than paying $6,688 at the end
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You're thinking of buying a car to travel around in, rather than paying $6,688 at the end of every year to use the train. You can buy an old second hand car for $7,000 now (t=0), and sell it after 8 years for $5,500 (t=8). You estimate that the car will cost $6,500 per year in fuel, insurance, registration and maintenance, paid in arrears, so there will be 8 payments from t=1 to t=8 inclusive. The required return is 7% pa. calculate The equivalent annual cost (EAC) of the car.
Related Book For
Fundamentals of Corporate Finance
ISBN: 978-1259024962
6th Canadian edition
Authors: Richard Brealey, Stewart Myers, Alan Marcus, Devashis Mitra, Elizabeth Maynes, William Lim
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