Question

8. Daisy is trying to figure out how much negotiating room she has in purchasing a new car. The car has an MSRP of $34,995.99. She has learned from an industry insider that most car dealerships have a 20% markup on selling price. What does she estimate the dealership paid for the car?

Answer 1

To estimate the dealership's cost for the car, we need to first calculate the dealership's selling price. We know that the car has an MSRP of $34,995.99, and we know that dealerships typically have a 20% markup on selling price.

So, to find the dealership's selling price, we can use the formula:

Selling price = MSRP + (Markup percentage * MSRP)

Substituting the values we have:

Selling price = $34,995.99 + (20% * $34,995.99)

Selling price = $34,995.99 + $6,999.20

Selling price = $41,995.19

Therefore, we estimate that the dealership paid $41,995.19 - the 20% markup - for the car.

To check this estimate, we can calculate the dealership's cost using the formula:

Cost = Selling price - Markup

Substituting the values we have:

Cost = $41,995.19 - (20% * $41,995.19)

Cost = $41,995.19 - $8,399.04

Cost = $33,596.15

This is very close to the MSRP of $34,995.99, which suggests that our estimate is reasonable.