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# kaan sen (1) - 1 Tom is considering purchasing a 24 000 car...

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1. 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 parking £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 % annual interest, should he buy the car? Use an annual worth comparison method.(4.23)  Xo, AC(car) = £10  12 2. An investor is offered a project that needs an initial investment of \$240,000. The investment produces a net profit of \$20,000 in the first year increasing by \$10,000 each year for five years after that (a total project duration of six years), with a final payment of \$15,000 at the termination (end of the sixth year). If the inflation rate is assumed to be a constant for the next 10 years at 4.545% per year, and the prevailing market interest rate is estimated to be 15%
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