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Homework: Chapter $12-3$

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The Riteway Ad Agency provides cars for its sales staff. In the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company's present fleet of cars is three years old and will be sold very shortly. To provide d replacement fleet, the company is considering two alternatives:

Purchase alternative: The company can purchase the cars, as in the past. and sell the cars after three years of use. Ten cars will be needed, which can be purchased at a discounted price of $$20,000$ each. If this altemative is accepted, the following costs will be incurred on the fleet as a whole:

$01-59\mathrm{.}58\{$:$[$$$3","630],[$$$,1","500],[$$$4","000],[$$$,6","000]$:$\}$

At the end of three years, the flect could be sold for one$-$half of the original purchase price.

Lease olternative: The company can lease the cars under a three$-$year lease contract. The lease cost would be $$55000$ per year the and pay all the taxes. Riteway would be required to make a $513,000$ security deposit at the beginning of the lease perlod. which would be refunded when the cars were returned to the owner at the end of the lease contract.

Riteway Ad Agency's required rate of return is $199.$

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