2. Indicate whether each of the following factors would be relevant or irrelevant to your decision:

a. The $5,000 you paid for your junker two years ago. Irrelevant- It is sunk cost, does not affect decision making.

b. The $1,500 your vehicle is worth today. Irrelevant- Its the same because does not change decision making.

c. The blue book value of the Jeep Cherokee. Irrelevant Because it is not the price offered by the seller.

d. The sticker price of the Hyundai Elantra. Relevant- It is the price at which Hyundai Elantra would be bought.

e. The difference in fuel economy for the Jeep and the Hyundai. Relevant- Full cost in both cases would vary, thus relevant.

f. The cost of on-campus parking. Irrelevant- Alternatives does not change decision making.

g. The difference in insurance cost for the Jeep and the Hyundai. Relevant- Insurance cost in both alternatives would vary.

h. The difference in resale value five years from now for the Jeep and the Hyundai. Relevant- It adds cash flow arising from the decision taken.

i. The fact that the Hyundai comes with a warranty while the Jeep does not. Relevant- Warranty cost in both alternatives is different. Relevant for decision making.

3. Consider only the costs you classified as irrelevant in #2 above.

a. Would any of these costs be relevant if you were deciding whether to keep your present vehicle or buy a new one?

b. Would any of these costs be relevant if you were deciding whether to get rid of your vehicle and ride your bike to work and school?