Alternative instead of his mini-van and benefits-cost ratio

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Reference no: EM131576576

Jim's 1998 mini-van is functional. He purchased it in 1998 for $11,000 from a bank which required he make a down payment of $2500 at a 3% annual interest rate.

Jim returned to his original purchase and an alternative he was considering. The alternative required a down payment of only $2000. He could use his mini-van to take his friends to school and they could pay him a total of $600 a year in gas money. With the alternative, he would only receive $550 a year because of the reduced amount of spacing. Based solely on the down payment and gas money:

a) Should Jim have purchased the alternative instead of his mini-van?

b) Provide a benefits-cost ratio to support your decision.

Reference no: EM131576576

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