Megan can purchase a new car for $30,000. Alternatively, in addition to a down payment of $2,000,Megan can make lease payments of $475 at the beginning of each month for three years to lease the car.The car has a residual value of $15,000. Assume that the cost of borrowing is 3.85% compoundedmonthly.Which option is economically better for Megan?In the lease option, what will be the buyback value of the vehicle at the end of two years?

A leasing arrangement is a legal contract in which the lessor, who is the owner of the asset, offers…

Answered: Megan can purchase a new car for…

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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Similar questions

Emma runs a small factory that needs a vacuum oven for brazing small fittings. She can purchase the model she needs for $180,000 up front, or she can lease it for five years for $4200 per month. She can borrow at 7% APR, compounded monthly. Assuming that the oven will be used for five years, should she purchase the oven or should she lease it? O A. Buy, since the present value (PV) of the lease is $32,108 more than the cost of the oven. O B. Lease, since the present value (PV) of the lease is $8642 less than the cost of the oven. O C. Lease, since the present value (PV) of the lease is $2212 less than the cost of the oven. O D. Lease, since the present value (PV) of the lease is $12,224 less than the cost of the oven.
you are buying new television. from past experience you estimate future repair cost as P500 during the first year, P1800 during the second year, P2700 during the third year and P3700 during the fourth year. The dealer offers to sell you a four year repair contract for P7000. You require at least 6% interest rate on your investments. should you invest in the repair contract?
John Lloyd and Izan want to buy a $138,000 home. They plan to pay 20% as a down payment, and take out a 30 year loan at 4.15% interest for the balance. a) How much is the loan amount going to be? b) What will the monthly payment be for John Lloyd and Izan? c) How much of the first payment is interest? d) What is the total of the payments? e) How much interest was paid?
An apartment requires a 12-month lease. The terms of the lease require you to pay $1, 000 upfront when you move in (the first month's $500 rent, plus a $500 security deposit). You then must pay S 500 monthly per month, except at the end of the 12th month when you do not pay but receive your $500 security deposit back. What is the present value cost of this lease to you if your prevailing interest rate is the (absurdly large) 3.26% per month? (You can use a spreadsheet.)
Josh and Samantha have been renting a small apartment and have now decided that they are ready to purchase a house.The one they have found has a selling price of $300,000. They will make a 20% down payment. Option 1: 3.125% interest 30-year mortgage: Option 2: 2.5% interest 15-year mortgage: Which option will result in a lower monthly payment if they take the full term of the mortgage? What will that monthly payment be? Which option will result in the most total interest if they take the full term of the mortgage? What will that total interest be?
Houda is going to lease a car for one year. She has 2 choices: Make a monthly lease payment of $400 on the first day of each month; or pay the entire lease payment of $4000 today. Assume she an earn 1% every month. Which is her best choice. Show your calculations.
Kelly and Tim Jarowski plan to refinance their mortgage to obtain a lower interest rate. They will reduce their mortgage payments by $60 a month. Their closing costs for refinancing will be $1,760. How long will it take them to cover the cost of refinancing? (Round your answer to the nearest whole number.) Number of months
Mike and Jenny purchase a house for a selling price of 310,000 and need to make a 15% down payment. The remainder of the mortgage amount will be aromatized over 25 years at a rate of 3.5%/annually.Assume they will never refinance and will pay it off in the full 25 years. a)How much money will they need to borrow from the bank? b)What are their monthly payments? c)How much do they pay in total for their mortgage? d)If they could only afford to make payments of 1,200,how much would they have left to pay off their mortgage after 25 years? Please answer all subparts. I will really upvote. Thanks
Marian Plunket owns her own business and is considering an investment. If she undertakes the investment, it will pay $4,680 at the end of each of the next 3 years. The opportunity requires an initial investment of $1,170 plus an additional investment at the end of the second year of $5,850. What is the NPV of this opportunity if the interest rate is 2.3% per year? Should Marian take it? What is the NPV of this opportunity if the interest rate is 2.3% per year? The NPV of this opportunity is $. (Round to the nearest cent.)
Anna and Bob have decided to buy an apartment. The cost of the apartment isRM150,000. They can get a 25-year mortgage at 8% and plan to make a downpayment of 20% of the selling price. What will be their monthly mortgage payment?
A family wants to buy an apartment in a building that is being built on Calzada de Tlalpan # 910, the apartment has a price of $3,400,000.00, the family can pay a 20% down payment and for the rest they agree to sign a 15-year mortgage with BANORTE with (equal) monthly payments, calculated at a rate of 10.75% per yeara) Calculate the value of the down paymentb) Calculate the value of each of the paymentsc) From the first payment, calculate how much money is used to pay interest? How much is spent paying for the house?d) Construct the amortization table for our problem (only 5 lines)e) After 98 payments, how much does the family still owe?f) After 119 payments, how much of the house has the family already paid for?
marian plunket owners her own business and is considering an investment. If she undertakes the investment, it will pay $32,000 at the end of each of the next 3 years. The opportunity requires an initial investment of $8,000 plus an additional investment at the end of the second year of $40,000. What is the NPV of this opportunity if the interest rate is 8% per year? Should marian take it?

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