It was a nice early summer evening, and the prof and his wife were contemplating a scenic
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"I think we have to get a new car." the prof's wife said.
"No way. Your grandmother drove it for 15 years, so we have to drive it for at least that," the prof replied.
"Listen, there is smoke and the smell of burnt wiring coming from it every day. The car is simply not safe and I don't want to put our girls in it anymore. How about the new Golf? They start at $15,300!
"A Golf! Really? German engineering? It's like our neighbour says: Sure, they have a fancy design, but they are small and make useless cup-holders!" What about the Toyota Matrix? They also start at around $15,000.
In the following days the prof and his wife visited two Volkswagen and two Toyota dealers. After deciding on the necessities and comparing various models, they settled on two models: Volkswagen Golf City with the comfort package and air conditioning, and the Toyota Matrix XR with no extras. Both had air conditioning, power locks and power windows, which were the three "musts," and both came with manual transmission. Despite that it was early in the summer, Toyota had already released next year's model, while Golf was still selling the current-year model. Though the Matrix XR had a slightly bigger engine (2.4 litre, 4 cylinders and 158 horsepower) versus the Golf (2.0 litre. 4 cylinders and 115 horsepower), it had almost the same gas mileage at approximately 30/40 miles per gallon in city/highway driving (approximately 10/7 litres per 100 kilometres city/highway driving). With the steady increase in gas prices, the prof contemplated what the annual savings in gas over El Poderoso might be. The base price for the Golf City with the comfort package and air conditioning came to $17,925, while the base price for the Matrix XR was $19,180; however, with the fees, taxes, levies and initial rebates the list price was $22,325 for the Golf and $22,861 for the Matrix XR. The prof and his wife had budgeted for $20,000, and wondered what discount they could get.
The prof secretly favored the Matrix as it was much roomier and the back seats folded completely flat (including the front passenger seat). This feature would be perfect for rolling out a sleeping bag to sleep on during the weekend fishing trips that he was planning for the autumn; however, he had to admit that the Golf was much more fun to drive. Despite the smaller engine, it had greater pep and responded better during curves, not to mention the race car-like stick-shift and impressive stereo system. The prof's wife was and always would be an avid German car fanatic.
Talking with the sales agents had been quite the amusement for the prof. Their sales spiels and reasoning defied all logic, and only the prof's wife was able to notice the prof's smirk and that their arguments were not biting.
"And you know, at 36-month financing, our interest rate is only 0.9 per cent!" the Volkswagen dealer said. "And at 48 months it is 1.9 per cent. I bet Toyota does not offer that!"
"No, that is a good rate. Theirs is 4.9 per cent and 5.9 per cent, respectively," the prof conceded.
"Well, there you go!" the sales agent triumphantly exclaimed..
The prof's wife could see that the Volkswagen sales agent had hit the right chord and could infer what the prof was thinking: "What is the value of that?"
Question:
Assume the Volkswagen dealer does not change his price: what equivalent price does the Toyota dealer have to offer to make the two cars' prices equivalent?
Related Book For
Introduction To Federal Income Taxation In Canada
ISBN: 9781554965021
33rd Edition
Authors: Robert E. Beam, Stanley N. Laiken, James J. Barnett
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