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In: Finance

After deciding to buy a new car, you can either lease the car or purchase it...

After deciding to buy a new car, you can either lease the car or purchase it on a two-year loan. The car you wish to buy costs $36,000. The dealer has a special leasing arrangement where you pay $101 today and $501 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 5 percent. You believe you will be able to sell the car for $24,000 in two 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 two 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.11,520.74 correct answer

b.37,904.88 Wrong answer

c.27,048.14 correct answer

I need help with portion B. please explain.

Solutions

Expert Solution

SEE THE IMAGE. ANY DOUBTS, FEEL FREE TO ASK. THUMBS UP PLEASE

jeff jeffy answered 1 year ago
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