5. Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4,000 (paid at the end of each month). Your firm can borrow at 6% APR with quarterly compounding. Should you purchase the delivery truck or lease it? Why?

5. Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4,000 (paid at the end of each month). Your firm can borrow at 6% APR with quarterly compounding. Should you purchase the delivery truck or lease it? Why?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 22P

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Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $250 000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $5 000 (paid at the end of each month). Your firm can borrow at 5% APR with quarterly compounding. What is the present value of lease payments? (Rounded to the nearest dollar)
You are planning on buying a new house and want to make sure you can afford the monthly payments. The house you picked will necessitate you borrow $300,000. You think you can get the following. mortgage terms: borrow $300,000 at a fixed quoted (nominal) annual rate of 3.775%; to be paid off in equal monthly payments over 15 years.Compute the required monthly payment, and prepare an amortization table, showing for each month the beginning balance, payment, payment applied to interest, payment applied to principal, and ending. balance. (Assume monthly compounding) (solution needs to be in excel)
You have to buy a new copier. The cost of the copier is $1,900, plus $415 per year in maintenance costs. The copier will last for five years. Alternatively, a local company offers to lease the copier to you and do the maintenance as well. If your discount rate is 6.5%, what is the most you would be willing to pay per year to lease the copier (your first lease payment is due in one year)? (Select the best choice below.) A. The most you would be willing to pay per year to lease the copier is $415. B. The most you would be willing to pay per year to lease the copier is $3,624.61. C. The most you would be willing to pay per year to lease the copier is $872.21. D. The most you would be willing to pay per year to lease the copier is $1,900.
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3) You are purchasing a car and have the option to pay $25,000 in cash (upfront) OR assume a lease with end of the month payments of $399 for five years. By purchasing, you will receive an estimated residual value (or scrap value) by selling the car for $2,500 at the end of the 5 years. If interest is 2.7% compounded annually, which financing option would you prefer? (16.1 DCF)
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1. You have a choice of leasing a truck for six years at $9,000/year, paid at the end of each year, or buying the truck for $44,000. At the end of six years the truck would be worthless. The interest rate is 5.5%. Would you lease or buy? 2. A similar situation as #1: lease for $9,000/year, or buy for $44,000, but if you buy the truck, and pay to maintain the truck (e.g. change oil and other fluids, replace windshield wipers, belts, tires, etc.), which are $500/year, paid at the end of each year, then at the end of six years, the truck would be worth $2,000 and you could sell the truck. Would you lease or buy?
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You are considering an option to purchase or rent a single residential property. You can rent it for $2,000 per month and the owner would be responsible for maintenance, property insurance, and property taxes. Alternatively, you can purchase this property for $200,000 and finance it with an 80 percent mortgage loan at 4 percent fixed-rate interest that will fully amortize over a 30-year period. The loan requires monthly payments. The loan can be prepaid at any time with no penalty. You have done research in the market area and found that (1) properties have historically appreciated at an annual rate of 2 percent per year, and rents on similar properties have also increased at 2 percent annually; (2) maintenance and insurance are currently $1,500.00 each per year and they have been increasing at a rate of 3 percent per year; (3) you are in a 24 percent marginal tax rate and plan to occupy the property as your principal residence for at least four years; (4) the capital gains exclusion…