You currently don't have a car, but rent a car that's parked just outside your...
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Finance
You currently don't have a car, but rent a car that's parked just outside your house whenever you need one. Your annual expenditure on rental cars is $2,500.
You are now considering purchasing a car that would give you the same level of convenience as your current life style. The car costs $26,000 and can be sold for $5,000 after 10 years. You'd purchase the car with money from your savings account which always earns an interest rate of 6%.
Assume that all cash flows occur at the end of each year (maybe because you drive much more around Thanksgiving and Christmas). What is the present value of the benefits of owning that car, i.e., saving on rental expenses and selling the car?
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