4. You plan to lease (Begin Mode!!!) a new care today. The dealership's finance office quotes you a deal with no money down and a $450 monthly payment (assume no taxes) for the next 36 months. Atthe end of the 36 months you plan to buy the car for $18,000. Thelisted price today for the car is $30,000 What CAP RATE (the interest rate on the lease) are they charging for this lease deal? Some notes: Think about which way your cash flows go. You willl make a $450 payment each month. You will also pay $18,000 at the end of the lease if you buy the car The I/Y you calculate for the MONTHLY payments is not the final answer! 1. 2. N I/Y PV PMT FV CAP RATE on the lease: (This is the answer to the question)

Question
4. You plan to lease (Begin Mode!!!) a new care today. The dealership's finance office quotes you a deal
with no money down and a $450 monthly payment (assume no taxes) for the next 36 months. Atthe
end of the 36 months you plan to buy the car for $18,000. Thelisted price today for the car is $30,000
What CAP RATE (the interest rate on the lease) are they charging for this lease deal?
Some notes:
Think about which way your cash flows go. You willl make a $450 payment each month. You will
also pay $18,000 at the end of the lease if you buy the car
The I/Y you calculate for the MONTHLY payments is not the final answer!
1.
2.
N
I/Y
PV
PMT
FV
CAP RATE on the lease:
(This is the answer to the question)

Image Transcription

4. You plan to lease (Begin Mode!!!) a new care today. The dealership's finance office quotes you a deal with no money down and a $450 monthly payment (assume no taxes) for the next 36 months. Atthe end of the 36 months you plan to buy the car for $18,000. Thelisted price today for the car is $30,000 What CAP RATE (the interest rate on the lease) are they charging for this lease deal? Some notes: Think about which way your cash flows go. You willl make a $450 payment each month. You will also pay $18,000 at the end of the lease if you buy the car The I/Y you calculate for the MONTHLY payments is not the final answer! 1. 2. N I/Y PV PMT FV CAP RATE on the lease: (This is the answer to the question)

Expert Answer

Want to see the step-by-step answer?

See Answer

Check out a sample Q&A here.

Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

See Answer
*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.
Tagged in
BusinessFinance

Corporate Finance

Related Finance Q&A

Find answers to questions asked by student like you

Q: An investment project has the following cash flows. 2. 001 : Cash Flow Year 060 $300 1 $300 2 01 $30...

A: 1.Calculate the present value as follows:

Q: NikkiG’s Corporation’s 10-year bonds are currently yielding a return of 6.75 percent. The expected i...

A: Calculate the maturity risk premium (MRP) as follows:

Q: Langston Labs has an overall (composite) WACC of 10%, which reflects the cost of capital for its ave...

A: In order to maximize the shareholders' wealth, the risk involved in a project (or investment) should...

Q: Assume that you are considering the purchase of a 15-year, noncallable bond with an annual coupon ra...

A: Click to see the answer

Q: 2. Your client is 30 years old and wants to retire at age 55. They currently have $100,000 in their ...

A: Hence, the present value of monthly contribution is $44,835.The present value of the contribution ma...

Q: Even though most corporate bonds in the United States make coupon payments semiannually, bonds issue...

A: Calculation of Current Price of Bond:The current price of bond is €884.56.Excel Spreadsheet:

Q: Assuming that the rates of return associated with a given asset investment are normally distributed;...

A: a) Calculation of standard deviation:Standard deviation is 0.3516.Standard deviation can be derived ...

Q: Assume the following ratios are constant:             Total asset turnover   2.6     Prof...

A: The maximum growth which a firm can achieve by using internal resources and fund is known as sustain...

Q: Mildly impressed, your two year old takes a break to ponder compounding. After lunch, a nap and two ...

A: The number of compounding periods for annual has 1 compounding period, semi-annual has 2 compounding...