Question

​John's 8minusyearminusold Chevrolet Trail Blazer requires repairs estimated at $ 8 comma 000 to make it road worthy again. His​ wife, Sherry, suggested that he should buy a 5minusyearminusold used Jeep Grand Cherokee instead for $ 8 comma 000 cash. Sherry estimated the following costs for the two​ cars: Trail Blazer Grand Cherokee Acquisition cost $ 25 comma 000 $ 8 comma 000 Repairs $ 8 comma 000 long dash Annual operating costs ​ (Gas, maintenance,​ insurance) $ 2 comma 680 $ 1 comma 800 What should John​ do? What are his savings in the first​ year?

Answer 1

Answer:

$880

Explanation:

For savings, we have to compute the total operating cost of Trail Blazer and the Grand Cherokee which is shown below:

The Total operating cost of Trail Blazer = Repair +  Annual operating costs ​

= $8,000 + $2,680

= $10,680

And, the Total operating cost of Grand Cherokee would be

= Acquisition cost + annual operating cost

= $8,000 + $1,800

= $9,800

So, the net saving would be

= $10,680 - $9,800

= $880