3 Questions of of Corporate Finance.

Dvat

Business

Asked: Mar 2nd, 2015

Question Description

The following data applies to the next 3 questions.

After deciding to buy a new car, you can either lease the car or purchase it with a three-year loan. The car costs $30,000. The dealer has a lease program where you pay $100 today and $400 per 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 8 percent APR. You believe that you will be able to sell the car for $20000 in three years.

What is present value of leasing including the initial payment of $100?

a	$12,554.51
b	$12,864.72
c	$13,855.46
d	$14,235.67
e	$14,587.82

What is the cost of keeping the car for three years by purchasing it?

a
$14,254.91
b
$14,898.33
c
$15,234.54
d
$15,400.35
e
$15,667.67

How much is the breakeven resale price of the car in three years that would make you indifferent between leasing and buying?

a
$19,225.37
b
$19,451.25
c
$19,515.35
d
$20,259.53
e
$21,765.86

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