Paul Scott has a 2008 Cadillac that he wants to update with a geo-tracker device so he will have access to road maps and directions. After-market equipment can be fitted for a flat fee of $500, and the service provider requires monthly charges of $20. In his line of work as a traveling salesman, he estimates that this device can save him time and money-about $35 per month (as the price of gas keeps increasing).
In order to determine the financial feasibility of purchasing the geo-tracker, Paul wants to determine the number of months it will take to break even. He plans to keep the car for another 3 years.
a. Calculate the breakeven point for the device in months.
b. Based on a, should Paul have the tracker installed in his car?