Used mercedes horse transporter for her connecticut estate

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Reference no: EM13971007

Marsha Jones has bought a used Mercedes horse transporter for her Connecticut estate. It cost $39,000. The object is to save on horse transporter rentals.

Marsha had been renting a transporter every other week for $204 per day plus $1.20 per mile. Most of the trips are 90 miles in total. Marsha usually gives the driver a $30 tip. With the new transporter she will only have to pay for diesel fuel and maintenance, at about $0.49 per mile. Insurance costs for Marsha’s transporter are $1,400 per year.

The transporter will probably be worth $19,000 (in real terms) after eight years, when Marsha’s horse Nike will be ready to retire. Assume a nominal discount rate of 9% and a 4% forecasted inflation rate. Marsha’s transporter is a personal outlay, not a business or financial investment, so taxes can be ignored.

Hint: All numbers given in the question are in real term.

Reference no: EM13971007

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