Your friend Jose is trying to decide whether to buy or lease his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost \($26,500\), and Jose expects about \($500\) per year in maintenance costs. He would keep the vehicle for five years and estimates the salvage value to be \($8,500\). Alternatively, Jose could lease the same vehicle for five years at a cost of \($4,200\) per year including maintenance. Assume a discount rate of 10 percent.

Required:

1. Determine the net present value of Jose’s options.

2. Advise Jose which option he should choose and explain your reasoning.