1. The car you like costs $35,000. You are trying to decide whether you should lease or...
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Question:
1. The car you like costs $35,000. You are trying to decide whether you should lease or buy the vehicle.
Lease:
If you lease the car from the dealer, you must pay $1,700 today, and $400 per month for the next 3 years. At the end of the 3-year lease (3 years from today), you will return the vehicle to the dealer.
Buy:
If you buy the car, you will obtain a three-year, $35,000 loan @ 6% per year, compounded monthly. The loan will be repaid over the next 36 months (36 monthly payments, beginning one month from today). Three years from today, you will be able to sell the car for $22,000 (resale price).
- What is the monthly payment on the car loan?
- What resale price three years from today would make you indifferent between buying and leasing?
Related Book For
Introduction To Corporate Finance
ISBN: 9781118300763
3rd Edition
Authors: Laurence Booth, Sean Cleary
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