e QUESIlnnl-CML-Z-NWASSIgr x Case 2 - NPV Assignment 0 - ' . Help | 5." ll Ext: ] _Submil The Wrongway Ad Agency provides cars for its sales staft In the past. the company has always purchased 115 cars from a dealer and then sold the cars alter three years of use. The company's present eet of cars is three years old and will be sold very shortly. To provide a replacement eet, the company is considering two alternatives as follows: Purchase Alternative. The company can purchase the cars. as in the past. and sell the cars alter three years of use Ten cars will be needed, which can be purchased at a discounted price of $20,400 each. If this altematlve is accepted. the following costs will be incurred on the Fleet as a whole: Annual cost of servicingtaxes. and licensing $1050 Repairmyearl ' ' " ' 2.100 Repairs. year 2 . 4,100 1 Repairs. year 3. 6.025 At the end of three years, the eet could be sold For one-half of the original purchase price. Lease Alternative The company can lease me cars under a three-year lease contracL The lease cost would be $64,000 per year (with the rst payment due at the end of year 1). As part of lhls lease cost, the owner would provide all servicing and repairs, license the cars, and pay all the taxes. Wrongway would be required to make a $34000 security deposit at the beginning of the lease period, which would be refunded when the cars were returned to the owner at the end of the lease contract