Breakeven analysis Paul Scot has a 2008 Cadlac that he wants

Breakeven analysis Paul Scot has a 2008 Cadlac that he wants to update wth a GFS system so he will have access to up-to-date road maps and directions. Aftermarket equipment can be fitted for a fat fee of 5506, and the service provider requires monthly charges of $21 In his line of work as a traveling salesperson, he estimates that this device can save him time and monay-about $38 per month (as the price of gas keaps inoreasing) He plans to keep he car for anothar 3 yeas a Calculate he ake point the devoe n months b. Based on (al, shouid Paul have the GP3 system installed in his car? The braakeven point wil bemonths (Round to one decimal place b. Based on (al, should Paul have the GPS system instalied in his car? (Select hom the drop-down menus)

Solution

Break even point =Fixed Cost/(Monthly Benfit-Monthly Cost)

=506/(38-21)

=29.8 Month

Yes he should install the GPS because his payaback is less than 3 years