General Motors advertised three alternatives for a 25-month lease on a new Blazer: (1) Zero dollars down
Question:
(1) Zero dollars down and a lease payment of $1,750 per month for 25 months,
(2) $5,000 down and $1,500 per month for 25 months, or
(3) $38,500 down and no payments for 25 months.
Use the present value Table B.3 in Appendix B to determine which is the best alternative (assume you have enough cash to accept any alternative and the annual interest rate is 12% compoundedmonthly).
Transcribed Image Text:
Bonds: $100,000 Par Value, Semiannual Interest Payments, Two-Year Life, 6% semiannual Contract Rate, 5% Semiannual Market Rate Semiannual Interest Period-End Cash Interest Paid Bond Interest Expense Amortization Premium Unamortized Carrying Premium Value $103,546 102,723 101,859 100,952 100,000 (0) 12/31/2011 S3,546 2,723 1,859 952 0 (1) 6/30/2012 2) 12/31/2012 (3) 6/30/2013 (4) 12/31/2013 $6,000 -S5 ,177 5,136 5,093 5,048 $24,000 S20,454 6,000 6,000 6,000 s 823 864 907 952 $3,546
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Related Book For
Fundamental Accounting Principles
ISBN: 978-0078110870
20th Edition
Authors: John J. Wild, Ken W. Shaw, Barbara Chiappetta
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