A foreign exchange student bought a used car for $10,000 and resold it one year later...
A foreign exchange student bought a used car for $10,000 and resold it one year later for $6,500. Insurance, license, and operating costs for the year were $1,500. What was his economic cost of owning and operating the car for the year if the market rate of interest was 10 percent?
Homework Answers
ANSWER:
Economic cost = price of used car - price of car sold + operating costs + (price of used car * interest rate)
Economic cost = 10,000 - 6,500 + 1,500 + (10,000 * 10%)
Economic cost = 5,000 + 1,000
Economic cost = 6,000
so the economic cost of the car for the year is $6,000
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