Please correct answer and don't used hand raiting How do I perform a lease versus purchase analysis for a new car. Ensure you specify thelength of the loan and the lease (they should be the same), the interest rates for the loan andthe lease, and the assumed opportunity cost rate of return.a. Agreed-upon purchase price -$25,000.00 b. Down payment-$2,500.00 c. Total loanpayments (monthly loan payment x (60) number of months) d. Opportunity cost of downpayment [opportunity cost rate x number of years x line b] e. Less: Expected market value ofthe car ar the end of the loan f. Total cost of purchasing Cost of Leasing g. Down payment (capitalized cost reduction) + security deposit h. Total lease payments (monthly lease payment x () number of months) i. Opportunity cost of total initial payment [opportunity cost rate xnumber of years x line g] j. Any end-of-lease charges (e.g., excess mileage), if applicable k.Less: Refund of security deposit I. Total cost of leasing

To perform a lease versus purchase analysis for a new car, you should follow these steps as outlined…

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EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter19: Lease And Intermediate-term Financing

Section: Chapter Questions

Problem 13P

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Automobile leases are built around three factors: negotiated sales price, residual value, and interest rate. The residual value is what the dealership expects the car’s value will be when the vehicle is returned at the end of the lease period. The monthly cost of the lease is the capital recovery amount determined by using these three factors. Solve, (a) Determine the monthly lease payment for a car that has an agreed-upon sales price of $34,995, an APR of 9% compounded monthly, and an estimated residual value of $20,000 at the end of a 36-month lease.∗ An up-front paymentof $3,000 is due when the lease agreement (contract) is signed. (b) If the estimated residual value is raised to $25,000 by the dealership to get yourbusiness, how much will the monthly payment be?
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Compare the cost of the following leasing agreement with the finance charge on a loan for the same time period: The value of the car is $15,000 at the beginning of the lease period, and its projected residual value at the end of three years is $4,000. The lease requires a $500 down payment. Monthly payment $315 Acquisition fee $300 Disposition charge $150 Other things being equal, one would want to finance this car rather than take this lease if the finance cost were equal to or less than?
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You are deciding whether to buy a car for $18,500 or to accept a lease agreement. The lease entails a $1000 fee plus monthly payments of $230 for 48 months. Under the lease agreement, you are responsible for service on the car and insurance. At the end of the lease, you may purchase the car for $7000. Complete parts a through c below. a. Should the cost of service and insurance determine which option you choose? OA. Yes, because you probably don't have to pay for services when you buy the car. OB. Yes, because you get a discount on your insurance when you lease the car. OC. No, because it is cheaper to lease the car than to buy it. OD. No, because you will probably have to pay for service and insurance with either plan. b. Does the total cost of purchasing the car at the end of the lease agreement exceed the cost of purchasing the car at the outset? A. Yes, the total cost of the car at the end of the lease is $ OB. No, the total cost of the car at the end of the lease is $ c. What are…
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Using the following information, what is the cost to lease a car? (Assume there are no charges for damage at the end of the lease.) Security deposit Monthly lease payment Opportunity cost of security deposit End-of-lease charges $300 $300 per month for a five-year lease 300 x loan period (in years) × 2% interest 500 Multiple Choice $18,000 $18,530 $18,560 $18,830
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Use the following data: Purchase Costs Leasing Costs Down payment: $4,800 Security deposit: $1,600 Loan payment: $1,440 for 48 months Lease payment: $1,440 for 48 months Estimated value at end of loan: $5,100 End-of-lease charges: $765 Opportunity cost interest rate: 2 percent Calculate the costs of buying versus leasing a motor vehicle. Cost of buying $ Cost of leasing $
Mid-South Auto Leasing leases vehicles to consumers. The attraction to customers is that the company can offer competitive prices due to volume buying. On September 30, 2024, the company leased a delivery truck to a local florist, Anything Grows. • The fiscal year for both companies ends December 31. • • • The lease agreement specified quarterly payments of $3,600 beginning September 30, 2024, the beginning of the lease, and each quarter (December 31, March 31, and June 30) through June 30, 2027 (three-year lease term). The florist had the option to purchase the truck on September 29, 2026, for $7,200 when it was expected to have a residual value of $11,800. The estimated useful life of the truck is four years. • Mid-South Auto Leasing's quarterly interest rate for determining payments was 3% (approximately 12% annually). Mid-South paid $30,040 for the truck. • Both companies use straight-line depreciation or amortization. • Anything Grows' incremental interest rate is 12%. Hint: A…
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