Question: Your sister just bought a new car having a sticker price (manufacturer's suggested retail price) of $36,000. She was crafty and was able to negotiate a sales price of $33,500 from the auto dealership. In addition, she received $4,500 for her old trade-in car under the U.S. government's "Cash for Clunkers" program. If her new car will have a resale value of $3,500 after seven years when your sister will shop for a replacement car, what is the annual capital recovery cost of your sister's purchase? The relevant interest rate is 8% per year, and your sister can afford to spend a maximum of $5,000 per year to finance the car (operating and other costs are extra).