You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on the best leases available, you have three options. (i) Purchase the car for cash and receive a $1,900 cash rebate from Dealer A. The price of the car is $19,000. (ii) Lease the car from Dealer B. Under this option, you pay the dealer $550 now and $225 a month for each of the next 36 months (the first $225 payment occurs 1 month from today). After 36 months you may buy the car for $10,900. (iii) Purchase the car from Dealer C who will lend you the entire purchase price of the car for a zero interest 36-month loan with monthly payments. The car price is $19,000. Suppose the market interest rate is 4%. What is the net cost today of the cheapest option?

You are interested in a new Ford Taurus. After visiting your Ford dealer, doing your research on the best leases available, you have three options. (i) Purchase the car for cash and receive a $1,900 cash rebate from Dealer A. The price of the car is $19,000. (ii) Lease the car from Dealer B. Under this option, you pay the dealer $550 now and $225 a month for each of the next 36 months (the first $225 payment occurs 1 month from today). After 36 months you may buy the car for $10,900. (iii) Purchase the car from Dealer C who will lend you the entire purchase price of the car for a zero interest 36-month loan with monthly payments. The car price is $19,000. Suppose the market interest rate is 4%. What is the net cost today of the cheapest option?

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter17: Accounting For Notes And Interest

Section: Chapter Questions

Problem 1MYW

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