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A local car dealer is advertising a standard 36-month lease of $900 per month for its new XT 3000 series sports car. The standard lease requires a down payment of $3,200, plus a $1,200 refundable initial deposit now. The first lease payment is due at the beginning of month 1. In addition, the company offers a 36-month lease plan that has a single up-front payment of $21,900, plus a refundable initial deposit of $1,200. Under both options, the initial deposit will be refunded at the end of month 36. Assume an interest rate of 6% compounded monthly. With the present-worth criterion, which option is preferred?

A local car dealer is advertising a standard 36-month lease of $900 per month for its new XT 3000 series sports car. The standard lease requires a down payment of $3,200, plus a $1,200 refundable initial deposit now. The first lease payment is due at the beginning of month 1. In addition, the company offers a 36-month lease plan that has a single up-front payment of $21,900, plus a refundable initial deposit of $1,200. Under both options, the initial deposit will be refunded at the end of month 36. Assume an interest rate of 6% compounded monthly. With the present-worth criterion, which option is preferred?

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A local car dealer is advertising a standard 36-month lease of $900 per month for its new XT 3000 series sports car. The standard lease requires a down payment of $3,200, plus a $1,200 refundable initial deposit now. The first lease payment is due at the beginning of month 1. In addition, the company offers a 36-month lease plan that has a single up-front payment of $21,900, plus a refundable initial deposit of $1,200. Under both options, the initial deposit will be refunded at the end of month 36. Assume an interest rate of 6% compounded monthly. With the present-worth criterion, which option is preferred? The present worth of the standard lease option is $ (Round to the nearest dollar.)
Transcribed Image Text:A local car dealer is advertising a standard 36-month lease of $900 per month for its new XT 3000 series sports car. The standard lease requires a down payment of $3,200, plus a $1,200 refundable initial deposit now. The first lease payment is due at the beginning of month 1. In addition, the company offers a 36-month lease plan that has a single up-front payment of $21,900, plus a refundable initial deposit of $1,200. Under both options, the initial deposit will be refunded at the end of month 36. Assume an interest rate of 6% compounded monthly. With the present-worth criterion, which option is preferred? The present worth of the standard lease option is $ (Round to the nearest dollar.)
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