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Required: 1. Calculate the net present value of Harold's options. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) 2. Advise Harold about which option he should choose. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net present value of Harold's options. (Future Value of $1,Present Value of $ $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amounts should be indicate final answers to 2 decimal places. Purchase Option Lease Option $ $ NPV (30,284.90) (15,699.78)

Required: 1. Calculate the net present value of Harold's options. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) 2. Advise Harold about which option he should choose. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net present value of Harold's options. (Future Value of $1,Present Value of $ $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amounts should be indicate final answers to 2 decimal places. Purchase Option Lease Option $ $ NPV (30,284.90) (15,699.78)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Your friend Harold is trying to decide whether to buy or lease his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $33,500, and Harold expects to spend about $1,200 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $13,300. Alternatively, Harold could lease the same vehicle for five years at a cost of $4,355 per year, including maintenance. Assume a discount rate of 12 percent. Required: 1. Calculate the net present value of Harold's options. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) 2. Advise Harold about which option he should choose. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net present value of Harold's options. (Future Value of $1,Present Value of $ $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amounts should be indicate final answers to 2 decimal places. Purchase Option Lease Option $ NPV (30,284.90) (15,699.78)
Transcribed Image Text:Your friend Harold is trying to decide whether to buy or lease his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives. Purchasing a new vehicle will cost $33,500, and Harold expects to spend about $1,200 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $13,300. Alternatively, Harold could lease the same vehicle for five years at a cost of $4,355 per year, including maintenance. Assume a discount rate of 12 percent. Required: 1. Calculate the net present value of Harold's options. (Future Value of $1,Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1.) 2. Advise Harold about which option he should choose. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Calculate the net present value of Harold's options. (Future Value of $1,Present Value of $ $1, Present Value Annuity of $1.) Note: Use appropriate factor(s) from the tables provided. Negative amounts should be indicate final answers to 2 decimal places. Purchase Option Lease Option $ NPV (30,284.90) (15,699.78)
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