Round dollar amounts to TWO decimal places.John leases a car priced at $20,373 with a contract that requires start-of-week payments of$64.15 for 4 years at 3.56% compounded weekly.a) What is the residual value of the car at the end of the lease?ModeA N=PV =FV =b) How much will John pay in total for leasing the car (without the residual value)?Total paid =

Lease refers to a contract between two parties under which one party who is the real owner of an…

Answered: a) What is the residual value of the…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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6. You're considering leasing or purchasing an asset with the following cash flows. a. Calculate the present value of the lease versus the purchase. Which is preferable? b. What is the largest annual lease payment you would be willing to pay? (Purchase. 5490.78) 2 Asset cost 3 Annual lease payment Residual value, year 3 Bank rate 4 5 6 NOSS 7 9 A B D LEASE VERSUS PURCHASE WITH RESIDUAL VALUE 10 11 Year 0 1 2 3 20,000 5,500 3,000 <-- Value of asset at end year 3 15% Purchase cash flow 20,000 -3,000 Lease cash flow 5,500 5,500 5,500 5,500
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Question 1 Seroja Berhad (Seroja) wishes to evaluate the following two alternatives available to acquire a machine: Lease Alternative Seroja can lease the machine under a 5-year lease requiring lease payment of RM5,000 at the beginning of each year. All maintenance costs will be borne by the lessor and the insurance and other costs will be borne by the lessee. "Borrowing to Buy" Alternative The machine costs RM20,000 and will have a 5-year life. The purchase will be financed by a 5- year, 15% interest. Seroja will pay RM1,000 per year for a service contract that covers insurance and other costs. Seroja Berhad plans to keep the machine and use it beyond its 5-year life. The machine will be depreciated as given below: Year Depreciation RM 1 5,000 2 4,000 3 3,000 4 2,000 5 1,000 Given that the corporate tax rate is 30%. From the above information you are required to answer the following questions. a. Give explanation to Seroja on ONE (1) benefit of leasing. b. Prepare the Cash Flows…
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a) What is the residual value of the car at the end of the lease? Mode N = PV = FV = b) How much will John pay in total for leasing the car (without the residual value)? Total paid =