Question content area top Part 1 MSRP $30,340 $44,740 Engin (liters) 3.7 5.7 Cylinders 6 8 Depreciatio
Posted: Mon Apr 25, 2022 8:42 am
Question content area top
Part 1
MSRP $30,340 $44,740
Engin (liters) 3.7 5.7
Cylinders 6 8
Depreciation over 5 years $17,383
$25,773
Finance charges over rntire 5-year period
$5,282 $7,789
Insurance over 5 years $7,566
$8,158
Taxes and fees over 5 years $2,185
$2,965
Maintenance/repairs over 5 years
$6,000 $6,000
Average miles per gallon 19
14
Ownership period in years 5
5
Miles driven per year over 5 years
17,000 17,000
Cost per gallon of gas over 5-year ownership
$3.12 $3.12
Marginal costs Personal Finance Problem Jimmy Johnson is
interested in buying a new Jeep SUV. There are two options
available, a V-6 model and a V-8 model. Whichever model he
chooses, he plans to drive it for a period of
5
years and then sell it. Assume that the trade-in value of the
two vehicales at the end of the
5-year
ownership period will be identical.There are definite
differences between the two models and Jimmy needs to make a
financial comparison. The manufacturer's suggested retail price
(MSRP) of the V-6 and V-8 are
$30,340
and
$44,740,
respectively. Jimmy believes the difference of
$14,400
to be the marginal cost difference between the two
vehicles.However, there is much more data available, and you
suggest to Jimmy that his analysis may be too simple and will lead
him to a poor financial decision. Assume that the prevailing
discount rate for both vehicles is
5.6%
annually. Other pertinent information on this purchase is shown
in the following table:
LOADING...
.a. Calculate the total "true" cost for each vehicle over
the
5-year
ownership period.b. Calculate the total fuel cost for each
vehicle over the
5-year
ownership period.
c. What is the marginal fuel cost from purchasing the larger
V-8 SUV?
d. What is the marginal cost of purchasing the larger and more
expensive V-8 SUV?
e. What is the total marginal cost associated with purchasing
the V-8 SUV? How does this figure compare with the
$14,400
that Jimmy calculated?
Note: Ignore the time value of money in your calculations.
Question content area bottom
Part 1
a. The true cost of the V-6 model is
$enter your response here.
(Round to the nearest dollar.)
Part 2
The true cost of the V-8 model is
$enter your response here.
(Round to the nearest dollar.)
Part 3
b. The fuel cost of the V-6 model is
$enter your response here.
(Round to the nearest dollar.)
Part 4
The fuel cost of the V-8 model is
$enter your response here.
(Round to the nearest dollar.)
Part 5
c. The marginal fuel cost from purchasing the V-8 model is
$enter your response here.
(Round to the nearest dollar.)
Part 6
d. The marginal cost of purchasing the V-8 model is
$enter your response here.
(Round to the nearest dollar.)
Part 7
e. The total marginal cost associated with purchasing the V-8
model is
$enter your response here.
(Round to the nearest dollar.)
Part 8
How does this figure compare with the
$14,400
that Jimmy calculated?The true marginal cost is
▼
higher
lower
than the difference between the costs of the two
vehicles. (Select from the drop-down menu.)
Part 1
MSRP $30,340 $44,740
Engin (liters) 3.7 5.7
Cylinders 6 8
Depreciation over 5 years $17,383
$25,773
Finance charges over rntire 5-year period
$5,282 $7,789
Insurance over 5 years $7,566
$8,158
Taxes and fees over 5 years $2,185
$2,965
Maintenance/repairs over 5 years
$6,000 $6,000
Average miles per gallon 19
14
Ownership period in years 5
5
Miles driven per year over 5 years
17,000 17,000
Cost per gallon of gas over 5-year ownership
$3.12 $3.12
Marginal costs Personal Finance Problem Jimmy Johnson is
interested in buying a new Jeep SUV. There are two options
available, a V-6 model and a V-8 model. Whichever model he
chooses, he plans to drive it for a period of
5
years and then sell it. Assume that the trade-in value of the
two vehicales at the end of the
5-year
ownership period will be identical.There are definite
differences between the two models and Jimmy needs to make a
financial comparison. The manufacturer's suggested retail price
(MSRP) of the V-6 and V-8 are
$30,340
and
$44,740,
respectively. Jimmy believes the difference of
$14,400
to be the marginal cost difference between the two
vehicles.However, there is much more data available, and you
suggest to Jimmy that his analysis may be too simple and will lead
him to a poor financial decision. Assume that the prevailing
discount rate for both vehicles is
5.6%
annually. Other pertinent information on this purchase is shown
in the following table:
LOADING...
.a. Calculate the total "true" cost for each vehicle over
the
5-year
ownership period.b. Calculate the total fuel cost for each
vehicle over the
5-year
ownership period.
c. What is the marginal fuel cost from purchasing the larger
V-8 SUV?
d. What is the marginal cost of purchasing the larger and more
expensive V-8 SUV?
e. What is the total marginal cost associated with purchasing
the V-8 SUV? How does this figure compare with the
$14,400
that Jimmy calculated?
Note: Ignore the time value of money in your calculations.
Question content area bottom
Part 1
a. The true cost of the V-6 model is
$enter your response here.
(Round to the nearest dollar.)
Part 2
The true cost of the V-8 model is
$enter your response here.
(Round to the nearest dollar.)
Part 3
b. The fuel cost of the V-6 model is
$enter your response here.
(Round to the nearest dollar.)
Part 4
The fuel cost of the V-8 model is
$enter your response here.
(Round to the nearest dollar.)
Part 5
c. The marginal fuel cost from purchasing the V-8 model is
$enter your response here.
(Round to the nearest dollar.)
Part 6
d. The marginal cost of purchasing the V-8 model is
$enter your response here.
(Round to the nearest dollar.)
Part 7
e. The total marginal cost associated with purchasing the V-8
model is
$enter your response here.
(Round to the nearest dollar.)
Part 8
How does this figure compare with the
$14,400
that Jimmy calculated?The true marginal cost is
▼
higher
lower
than the difference between the costs of the two
vehicles. (Select from the drop-down menu.)