Question
A company pays a sales representative 0.50 dollars per kilometer in return for using its own car for company works. However, the company is considering
A company pays a sales representative 0.50 dollars per kilometer in return for using its own car for company works. However, the company is considering another solution for this situation. So much so that the company will buy a car and make the car available to its representative. The data for this solution are as follows: The cost of buying such a car is 24,000 dollars and it has a service life of 5 years. The market value at the end of this life is 7,000 dollars. The cost of keeping the car in a garage when it is not running is 2,500 dollars per year, and the total fuel-tyre-maintenance costs are 0.30 dollars per kilometer. If the interest rate is 15%, how many kilometers must the sales representative travel so that the costs of both methods are equal (break-even)?
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