You're thinking of buying a car to travel around in, rather than using the train. You can buy an old second hand car for $9,000 now (t=0), and sell it after 10 years for $4,500 (t=10). You estimate that the car will cost $6,500 per year in fuel, insurance, registration and maintenance, paid in arrears, so there will be 10 payments from t=1 to t=10 inclusive. Find the equivalent annual cost (EAC) of the car if the required return is 7% pa.

Select one:

a.

$106,509.9819

b.

$9,895.2365

c.

$7,781.3975

d.

$7,455.6988

e.

$6,950