After deciding to acquire a new car, you can either lease the car or purchase it...
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After deciding to acquire a new car, you can either lease the car or purchase it with a four-year loan. The car you want costs $35,500. The dealer has a leasing arrangement where you pay $100 today and $500 per month for the next four years. If you purchase the car, you will pay it off in monthly payments over the next four years at an APR of 7 percent. You believe that you will be able to sell the car for $23,500 in four years. a. What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What break-even resale price in four years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value of lease b. C. Present value of purchase Break-even sale price After deciding to acquire a new car, you can either lease the car or purchase it with a four-year loan. The car you want costs $35,500. The dealer has a leasing arrangement where you pay $100 today and $500 per month for the next four years. If you purchase the car, you will pay it off in monthly payments over the next four years at an APR of 7 percent. You believe that you will be able to sell the car for $23,500 in four years. a. What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) b. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) c. What break-even resale price in four years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) a. Present value of lease b. C. Present value of purchase Break-even sale price
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Anwers a The present value of leasing the car can be calculated using the formula for present value ... View the full answer
Related Book For
Corporate Finance
ISBN: 978-1259918940
12th edition
Authors: Stephen Ross, Randolph Westerfield, Jeffrey Jaffe, Bradford Jordan
Posted Date:
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