Because of Its Age, Your Car Costs $4,000 Annually in Maintenance

Multiple Choice

Because of its age, your car costs $4,000 annually in maintenance expense.You could replace it with a newer vehicle costing $8,000.Both vehicles would be expected to last four more years.If your opportunity cost is 8 percent, by how much must maintenance expense decrease on the newer vehicle to justify its purchase?

A) $1,250
B) $1,585
C) $2,000
D) $2,415 8,000 = Annuity