Mr. Goldstein decides to buy a new car with a sticker price

alanforde800Maximus wrote:Mr. Goldstein decides to buy a new car with a sticker price of $45,500. If the sales tax comes out to 5 percent of the purchase price, but Mr. Goldstein is able to negotiate a purchase price that is a 20 percent discount off the sticker price, how much sales tax does Mr. Goldstein pay?

a) $455
b) $910
c) $1560
d) $1820
e) $2275

Please assist with above problem.

Tax = 5% of Purchase price

=> Tax = 5% of [80% of Sticker price]; After the 20% discount, the purchase price = (100 - 20)% of Sticker price

=> Tax = 5% * 80% * Sticker price

=> Tax = [5/100]*[80/100]*45500

=> Tax = 1/20 * 4/5 * 45500 = $1820.

OA: D

-Jay

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Hi alanforde800Maximus,

The answer choices to this question are 'spread out' enough that you can do some estimation (without having to do every exact calculation).

The starting sticker price on a car is $45,500, which I'll 'round down' to $45,000.
The 20% discount off of THAT price would be: $45,000 - (.2)($45,000) = $45,000 - $9,000 = $36,000
The 5% tax on the $36,000 = (.05)($36,000) = $1800

Since I rounded down the initial car price, the correct answer would be a little more than $1800....

Final Answer: D

GMAT assassins aren't born, they're made,
Rich

alanforde800Maximus wrote:Mr. Goldstein decides to buy a new car with a sticker price of $45,500. If the sales tax comes out to 5 percent of the purchase price, but Mr. Goldstein is able to negotiate a purchase price that is a 20 percent discount off the sticker price, how much sales tax does Mr. Goldstein pay?

a) $455
b) $910
c) $1560
d) $1820
e) $2275

We are given that Mr. Goldstein negotiates a purchase price that is 20% less than $45,500.

Thus he pays:

0.8 x 45,500 = $36,400

Since tax is 5% of the purchase price, the amount of tax is:

36,400 x 0.05 = $1,820

Answer: D