Present Values Consider each part independently.

1. Super-Fix Company would like to move its auto repair shop to a downtown location in order to attract more customers. What is the maximum Super-Fix should pay to purchase a building at the new location, assuming that the company needs to earn 12%?

The new building will last 40 years. Super-Fix estimates that moving to the new location will result in a $10,000 increase in annual income.

2. If Audrey Ostler buys a new small automobile that costs $14,000 and provides annual gasoline savings of $1,200, how long must she own the car before the savings justify its cost? Assume an 8% cost of capital.