Suppose the purchase price of a high-end forklift is CHF 150'000, its residual value in seven years is certain to be CHF 30'000, and there is no risk that the lessee will default on the lease. Assume that capital markets are perfect and the risk-free interest rate is 5% APR with monthly compounding.

a) Suppose that instead of leasing this luxurious forklift, the company is considering purchasing it outright by borrowing the purchase price using a seven-year annuity loan. What is the annual loan payment for a seven-year loan to purchase the forklift?

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A B D 1 Purchase price of the forklift 150000 3 Annual Percentage rate APR 5 4 ... View the full answer