Ef 351. Alexander can purchase a new car for $25,000. Alternatively, in addition to a downpayment of $1,600, Alexander can make lease payments of $500 at the beginning ofeach month for three years to lease the car. The car has a residual value of $12,500.Assume that the cost of borrowing is 3.90% compounded monthly.a. Which option is economically better for Alexander?Buy NowLeaseb. In the lease option, what will be the buyback value of the vehicle at the end of twoyears?Round to nearest cent

Present value is the estimation of the current value of future cash value which is likely to be…

Answered: Alexander can purchase a new car for…

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter5: The Time Value Of Money

Section: Chapter Questions

Problem 3P

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Del Hawley, owner of Hawleys Hardware, is negotiating with First City Bank for a 1-year loan of 50,000. First City has offered Hawley the alternatives listed here. Calculate the effective annual interest rate for each alternative. Which alternative has the lowest effective annual interest rate? a. A 12% annual rate on a simple interest loan, with no compensating balance required and interest due at the end of the year b. A 9% annual rate on a simple interest loan, with a 20% compensating balance required and interest due at the end of the year c. An 8.75% annual rate on a discounted loan, with a 15% compensating balance d. Interest figured as 8% of the 50,000 amount, payable at the end of the year, but with the loan amount repayable in monthly installments during the year
Joshua can purchase a new car for $35,000. Alternatively, in addition to a down payment of $1,400, Joshua can make lease payments of $550 at the beginning of each month for three years to lease the car. The car has a residual value of $17,500. Assume that the cost of borrowing is 4.31% compounded monthly. a. Which option is economically better for Joshua? Buy Now Lease b. In the lease option, what will be the buyback value of the vehicle at the end of two years?
You must decide whether to buy a new car for $19,000 or lease the same car over a three-year period. Under the terms of the lease, you can make a down payment of 1000$ and have monthly payments of $.150 At the end of the three years, the leased car has a residual value (the amount you pay i 12,000f you choose to buy the car at the end of the lease period) of $. Assume you can sell the new car at the end of the three years at the same residual value. Is it less expensive to buy or to lease? Question content area bottom Part 1 The cost for buying the car and selling it after three years would be $ enter your response here.
You are considering leasing a car for 48 months where the advertisement says that monthly payments are $399 with $5,000 due at signing. You have seen elsewhere that the market value of the new car is $35,000 and that the expected market value in 4 years is $25,000. What effective annual rate (EAR) are you paying for this lease?
Bisa is leasing a vehicle worth $20,000, with a down payment of $1000 and equal payments at the beginning of every two weeks for three years. What is the size of each lease payment if the cost of borrowing is 6.75% compounded monthly and the residual value is $10,500? The Textbook answer says $147.34........
Ben Halls is trying to decide whether to lease or purchase a new car costing $18,000. If he leases, he’ll have to pay a $600 security deposit and monthly payments of $450 over the 36-month term of the closed-end lease. Ben could earn 1% on the amount of any down payment or security deposit. On the other hand, if he buys the car then he’ll have to make a $2,400 down payment and will finance the balance with a 36-month loan with a 4% interest rate; he’ll also have to pay a 6 percent sales tax ($1,080) on the purchase price, and he expects the car to have a residual value of $6,500 at the end of 3 years. Ben can earn 4 percent interest on his savings
Chris Svenson is trying to decide whether to lease or purchase a new car costing $18,000. If he leases, he’ll have to pay a $600 security deposit and monthly payments of $425 over the 36-month term of the closed-end lease. On the other hand, if he buys the car then he’ll have to make a $2,400 down payment and will finance the balance with a 36-month loan requiring monthly payments of $515; he’ll also have to pay a 6 percent sales tax ($1,080) on the purchase price, and he expects the car to have a residual value of $6,500 at the end of 3 years. Chris can earn 4 percent interest on his savings. Use the automobile lease versus purchase analysis form to find the total cost of both the lease and the purchase and then recommend the best strategy for Chris.
Suppose you can buy a new Toyota corolla for $20000 and sell it for $12000 in third year. For simplication, assume you sell the car at the beginning of the third year but can keep driving it until the end of the third year. Alternatively you can lease the car for $300 per month for three years and return it at the end of the three years. For simplication, assume that lease payments are made yearly instead of monthly- i.e,, that they are $3600 per year and are made at the beginning of each of the three years. a. If the interest rate R is 4%, it is better to buy or lease? b. If the interest rate is 10%,it is better to buy or lease? c. At what interest rate would you be indifferent between buying and leasing the car in percent?
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A real estate broker decides to lease a car for 36 months. Suppose the annual interest rate is 7.8%, the negotiated price is $49,000, there is no trade-in, and the down payment is $4,000. Find the monthly lease payment (in dollars). Assume that the residual value is 49% of the MSRP of $51,5000. Round your answer to the nearest cent.
A firm can lease a truck for 4 years at a cost of $43,000 annually. It can instead buy a truck at a cost of $93,000, with annual maintenance expenses of $23,000. The truck will be sold at the end of 4 years for $33,000. Calculate present value if the discount rate is 10% PV of a Buy = PV of a Lease= Thanks so much!
Your car dealer is willing to lease you a new car for $399 a month for 48 months. Payments aredue on the first day of each month starting with the day you sign the lease contract. If your costof money is 3 percent, what is the current value of the lease?

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