In: Finance

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

on a three-year loan. The car you wish to buy costs $44,000. The
dealer has a special

leasing arrangement where you pay $1,000 per month, at the
beginning of each month,

for the next three years. If you purchase the car, you will pay
it off in monthly payments

over the next three years at a 3.6% APR. You believe you will be
able to sell the car for

$25,000 in three years. Assume that all payments occur at the end
of each month.

(a) Should you buy or lease the car? Provide all the
equations.

(b) What break-even resale price in three years would make
you

indifferent between buying and leasing?

Could you explain the question in detail with formula plz! I don't understand others poster answers.

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

**LEASE PAYMENTS ARE IN THE
BEGINNING OF THE YEAR**

**SO WE HAVE TO FIND PVIFAD =
PRESENT VALUE OF ANNUITY DUE = FORMULA SHOWN**

**THERE IS NO NEED TO FIND
MONTHLY PAYMENTS OF LOAN, THE RATE GIVEN IS TO BE USED FOR FINDING
PRESENT VALUE OF LEASE PAYMENTS**

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...

Lease or Buy
You are deciding whether to lease or
purchase a car. If you lease the car, your annual payments will be
$7,400 for the next four years (due at year end). If you buy the
car, you will pay $30,000 to purchase the car. You estimate the car
will have a resale value of $12,000 at the end of four years.
Assume the appropriate discount rate is 10%.
Should you lease or buy the car?
To answer this...

You need a new car. You can either lease or buy the car for
355000 SEK. In both cases you expect to use the car for 5 years. It
will have a residual value of 120000 SEK after 5 years. You can
borrow at a rate of 1.5% APR with monthly compounding.
(a) In case you buy the car you will take an annuity loan over 5
year at a borrowing rate of 1.5%. What will be your monthly
payments...

You are deciding whether to lease or
purchase a car. If you lease the car, your annual payments will be
$7,400 for the next four years (due at year end). If you buy the
car, you will pay $30,000 to purchase the car. You estimate the car
will have a resale value of $12,000 at the end of four years.
Assume the appropriate discount rate is 10%.
Should you lease or buy the car?
To answer this question, assume the...

Nodhead College needs a new computer. It can either buy it for
$320,000 or lease it from Compulease. The lease terms require
Nodhead to make six annual payments (prepaid) of $76,000. Nodhead
pays no tax. Compulease pays tax at 40%. Compulease can depreciate
the computer for tax purposes straight-line over five years. The
computer will have no residual value at the end of year 5. The
interest rate is 6%.
a. What is the NPV of the lease for Nodhead...

Nodhead College needs a new computer. It can either buy it for
$250,000 or lease it from Compulease. The lease terms require
Nodhead to make six annual payments (prepaid) of $62,000. Nodhead
pays no tax. Compulease pays tax at 35%. Compulease can depreciate
the computer for tax purposes using 5-year MACRS. The computer will
have no residual value at the end of year 5. The interest rate is
8%.
a. What is the NPV of the lease for Nodhead
College?...

Nodhead College needs a new computer. It can either buy it for
$250,000 or lease it from Compulease. The lease terms require
Nodhead to make six annual payments (prepaid) of $62,000. Nodhead
pays no tax. Compulease pays tax at 35%. Compulease can depreciate
the computer for tax purposes using 5-year MACRS. The computer will
have no residual value at the end of year 5. The interest rate is
8%.
a. What is the NPV of the lease for Nodhead
College?...

A
Plc. needs a new computer that costs £750. It can either buy it or
lease it from the computer leasing company. The computer will be
depreciated using a five-year MACRS schedule (see details in the
formula sheet) and will be worth nothing at the end of six years. A
Plc. can lease the computer with the payments of £150 (pre-paid)
for six years. The corporate tax rate is 23 percent and the cost of
capital is 8.5 percent.
Compare...

Suppose you can buy a new car for $15,000 and sell it for $6,000
after six years. Or, you can lease the car to $300 per month for
three years and return it at the end of the three years. Assume
that lease payments are made yearly instead of monthly (i.e., are
$3,600 per year for each of the three years).
a.) If the interest rate, r, is 4 percent, should you lease or
buy?
b.) What if the interest...

Company Ginko’s can either buy or lease a printer. If the
company chooses to buy, the printer costs $250 upfront with varying
annual maintenance cost as shown below. The printer will last 3
years. Alternatively, the company can sign a 5-year lease to rent a
printer for an annual cost of $180. The company’s cost of capital
is 10%.(i) What is the EAC (equivalent annual cost) for buying a
printer? (ii) Which option (buy or lease) is better? Show your...

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