There is a choice to buy a car worth $28,000 with 100% financing at 4.99% APR for 60 month or lease at $450 per month. The car will need maintenance in the 3rd year worth $525 and $825 in the 4th year. The car will have 35% residual value in the 5th year. Sales tax on new car is 6% and required rate of return is 10%. Which option is better? Buying since IRR is 3.65% Leasing since IRR is 9.29% Buying, since IRR is 9.29% Leasing since IRR is 3.65%

There is a choice to buy a car worth $28,000 with 100% financing at 4.99% APR for 60 month or lease at $450 per month. The car will need maintenance in the 3rd year worth $525 and $825 in the 4th year. The car will have 35% residual value in the 5th year. Sales tax on new car is 6% and required rate of return is 10%. Which option is better? Buying since IRR is 3.65% Leasing since IRR is 9.29% Buying, since IRR is 9.29% Leasing since IRR is 3.65%

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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Suppose that you are thinking about buying a car and have narrowed down your choices to two options. The new-car option: The new car costs $32,000 and can be financed with a five-year loan at 6.95%. The used-car option: A three-year old model of the same car costs $17,000 and can be financed with a five-year loan at 5.01%. r P n What is the difference in monthly payments between financing the new car and financing the used car? Use PMT = - nt 1- 1+ The difference in monthly payments between financing the new car and financing the used car is $ (Round to the nearest cent as needed.)
There is a choice to buy a car worth $32,000 with 100% financing at 3.99% APR for 60 month or lease at $500 per month. The car will need maintenance in the 3rd year worth $525 and $825 in the 4th year. The car will have 30% residual value in the 5th year. Sales tax on new car is 6% and required rate of return is 5%. calculate the cost of Owning this car in year 4.
Leasing a machine requires making monthly payments of $6,000 for the next 5 years (i.e., at t = 1, 2, …, 60). Buying the machine today (t = 0) will cost you $320,000. Assume the machine is worthless after 5 years. You can borrow and lend at a semi-annually compounded interest rate of 6% (APR). Would you be better off by buying or leasing? Explain.
Show complete solution: Consider the following options in purchasing a car: Option 1 = purchase the normal price at a $26,200 and pay for the vehicle over 36 months with equal equity payments at 1.9% APR financing. Option 2 = Purchase the vehicle at a discounted price of $24,048 to be paid immediately (Cash). The funds that would be used is earning a 5% annual interest compounded monthly. a. Which option is more economical?
You are interested in buying a brand new jalopy and expect the purchase price to be $19,000. The car dealership can offer financing at a 6% interest rate over 6 years. If you put 1,000 down towards the purchase and accept the financing terms, what will your monthly payment for the loan be? In Excel
What is the highest price they can pay on the new vehicle if they can afford a down payment of $4,000?Assume they finance their purchase for 48 months at 7.5%?
When purchasing a $100,000 house, a borrower is comparing two loan alternatives. The first loan is an 80% loan at 4% with monthly payments of $591.75 for 15 years. The second loan is 90% loan at 5% with monthly payments of $526.13 over 25 years. What is the incremental cost of borrowing the extra money assuming the loan will be held for the full term? O 6.50% O 13.21% O 7.20% O 13.70%
Suppose you decide to obtain a 4-year lease for a car and negotiate a selling price of$28,990, including license fees. The trade-in value of your old car is $3850. If you makea down payment of $2400, the money factor is 0.0027, and the residual value is$15,000, find each of the following.a. The net capitalized costb. The average monthly finance chargec. The average monthly depreciationd. The monthly lease payment
Suppose that you have decided to buy a certain car that costs $28,950, including taxes and license fees. The dealership gives you two financing options: 1) Option A: The dealership takes $800 off the price of the car. You must make a down payment of $2000 and can finance the rest at 2.99% APR for 72 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? (Don’t forget to include your down payment.) 2) Option B: The dealership takes $1000 off the price and 0% financing for 36 months. a) How much will you be financing? b) How much will your monthly payments be under this option? (Round to the nearest dollar.) c) How much total money will you pay under this option? 3) Would you choose option A or option B? Why?
Your landscaping company can lease a truck for $8,150.00 a year for 4 years. It can instead buy the truck for $23,388.56. The truck will be valueless after 4 years. a. What is the present value of the lease payments, If the interest rate your company can earn on its funds is 11.00%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value b. Is it cheaper to buy or lease? buy lease
You are considering either buying or leasing a vehicle. The following data have been compiled:If your interest rate is 6% compounded monthly, at what value of the vehicle at the end of 3 years (S) would make both options economically equivalent?(a) $7,711{b) $8,980(c) $9,228(d) $9,310
Two plans are available for a company to obtain automobiles for its salesmen. Use an interest rate of 10%. Plan A: Lease the cars and pay $0.20 per mile. Plan B: Purchase the cars for $6000 and economic life of three years, after which it can be sold for $1200. Gas and oil cost $0.05 per mile. Insurance is $500 per year A. What is annual cost for plan B? B. What is the annual cost of plan A if the miles driven by the car is 10,000?

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