You are planning to purchase a 2nd hand car, run it for 3 years and sell it. You are considering 4 options.

Option A: Purchase Price $2000; Resale after 3 years $800. Insurance $1500/yr, Fuel $500/yr, Service $500/yr.

Option B: Purchase Price $4000; Resale after 3 years $2000. Insurance $800/yr, Fuel $400/yr, Service $200/yr.

Option C: Purchase Price $3000; Resale after 3 years $800. Insurance $1500/yr, Fuel $450/yr, Service $500/yr.

Option D: Purchase Price $2500; Resale after 3 years $800. Insurance $1500/yr, Fuel $800/yr, Service $800/yr.

Using a real discount rate of 7% and assume that the purchase is made at the start of year 1, all costs are incurred at the end of the year and the resale is made at the end of the year.

Which car should you purchase based on the information above?

Select One:

Option C

Option A

Option B

Option D