Tom is considering purchasing a $24 000 car. After five years, he will be able to sell the

vehicle for $8000. Petrol costs will be $2000 per year, insurance $600 per year, and park-

ing $600 per year. Maintenance costs for the first year will be $1000, rising by $400 per

year thereafter.

The alternative is for Tom to take taxis everywhere. This will cost an estimated

$6000 per year. Tom will rent a vehicle each year at a total cost (to year-end) of $600 for

the family vacation, if he has no car. If Tom values money at 11 percent annual interest,

should he buy the car? Use an annual worth comparison method.