Shelly purchased a brand-new Corolla for $22,000 on January 1, 20XX when

she was attending a graduate school in Austin, Texas. About the

middle of February, there was a severe hail in Austin area. There was a report

that more than hundred vehicles has affected by hail. Unfortunately, her car

was one of those with severe damage. She immediately reported the incident

to her insurance company and filed an insurance claim. An inspector from a

local repair center authorized by the insurance company assessed the hail

damage of the car. The amount of the damage from the inspection was

$3,400, and the insurance company cut a check of $2,900 to her after

deducting $500.

She got a quote from a mechanic at the same repair center. The mechanic

told her that he could repair the damage completely with $2,900, so there will

be no extra out of pocket costs for her. One thing that bothers her was a

comment made by the mechanic. He said that it looks just like a new one after

the repair. He added that although no one would notice the repair, the market

value of the repaired car with such hail damage are likely to reduce by

$2,000.

She thought that replacing with another new Corolla (by trading-in the current

one) might be a viable option for her because her car is only a two-month

old car. She brought the vehicle to the dealership from which she purchased

the car. She asked how much extra she would need to pay if she replaces it

with a brand new car with the same model (Toyota Corolla). The sales person

told her that she would need to pay $3,400 with a trade-in of the damaged

car.

What would be the best for her: A) Replace it with a new car with the same

model/specification at a Toyota dealership; B) Repair hail damages at a car

repair center.

(Required) Conduct a Cost/Benefit Analysis based on a 2*2 matrix as below.

	Replace (A)	Repair (B)	Difference (A-B)
Benefits
Costs
Net benefits