An elderly relative offers to sell you their used 1958 Cadillac Eldorado for $50,000.You note that very similar cars are selling on the open market for $90,000.You don't care for classic cars and would rather buy a new Ford Explorer for $35,000.What is the net value of buying the Cadillac?
A)$90,000,since the Cadillac could be sold for this price.
B)$50,000,since the Cadillac could be bought for this price.
C)$40,000,since this is the difference between purchase and resale price of the Cadillac.
D)$35,000,since this is the value of the car that you really want to buy.

Question

Quizplus · Accepted Answer

The net value of buying the Cadillac is the difference between the purchase price and the resale price, which is $40,000 ($90,000 - $50,000). Choosing to buy the Cadillac and then resell it would result in a gain of $40,000. However, if the individual does not care for classic cars and would rather have a new Ford Explorer for $35,000, buying the Cadillac would not be the best choice for them personally.

An Elderly Relative Offers to Sell You Their Used 1958