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 $28,000, and Harold expects to spend about $650 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $11,100. Alternatively, Harold could lease the same vehicle for five years at a cost of $3,640 per year, including maintenance. Assume a discount rate of 10 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.) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your final answers to 2 decimal places. Do not round intermediate calculations.) Purchase Option Lease Option NPV

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 $28,000, and Harold expects to spend about $650 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $11,100. Alternatively, Harold could lease the same vehicle for five years at a cost of $3,640 per year, including maintenance. Assume a discount rate of 10 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.) (Use appropriate factor(s) from the tables provided. Negative amounts should be indicated by a minus sign. Round your final answers to 2 decimal places. Do not round intermediate calculations.) Purchase Option Lease Option NPV

Fundamentals Of Financial Management, Concise Edition (mindtap Course List)

10th Edition

ISBN:9781337902571

Author:Eugene F. Brigham, Joel F. Houston

Publisher:Eugene F. Brigham, Joel F. Houston

Chapter12: Cash Flow Estimation And Risk Analysis

Section: Chapter Questions

Problem 10P: Dauten is offered a replacement machine which has a cost of 8,000, an estimated useful life of 6...

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Please solve correctly . You are considering purchasing a dump truck. The truck will cost $75,000 and have operating and maintenance costs that start at $18,000 the first year and increases by $2,000 per year. Assume that the salvage value at the end of five years is $22,000 and interest rate is 15%. What is the annual operation and maintenance costs of owning this vehicle?
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3. Your favorite neighbor Poindexter learns you are pursuing an MBA and seeks your advice on how to finance 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 $26,500, and he expects to spend about $500 per year in maintenance costs. He would keep the vehicle for five years and estimates that the salvage value will be $10,500. Alternatively, Poindexter could lease the same vehicle for five years at a cost of $5,000 per year, including all maintenance. The lease payments are made at the beginning of each year. Assume a discount rate of 10%. o Provide an analysis for Poindexter at 10%. o Provide the same analysis for good old Poindexter assuming a rate of 5%. At what rate will he be indifferent? o
Tom is considering purchasing a $22400 car. After five years, he will be able to sell the vehicle for $8000. Petrol costs will be $2000 per year, insurance $600 per year, and parking $600 per year. Maintenance costs for the first year will be $1000, rising by $400 per year thereafter. The alternative is for Tom to take taxis everywhere. This will cost an estimated $6000 per year. Tom will rent a vehicle each year at a total cost (to year-end) of $600 for the family vacation, if he has no car. If Tom values money at 11 percent annual interest. What is the annual worth of buying a car? Should he buy a car? Enter YES or NO in the units box. Note: (Use a negative sign (-) for an overall cost)
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Liam has three other options for purchasing the Charles Street property. In the first scenario, he could borrow additional money to fund a renovation of the building. He wants to determine the monthly payment for the renovation. Use the monthly interest rate, the loan period in months, and the loan amount to calculate the monthly payment for the renovation scenario. In the second scenario, Liam could pay back the loan in 20 years instead of 15 and reduce his monthly payments to $6,000 with an annual interest rate of 4.5%. He wants to know the loan amount he should request with those conditions. Use the monthly interest rate, the loan period in months, and the monthly payment to calculate the loan amount for the 20-year scenario. In the third scenario, Liam could pay back the loan for eight years with a monthly payment of $8,000 and then renegotiate better terms. He wants to know the amount remaining on the loan after eight years, or the future value of the loan. Use the monthly…
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After deciding to acquire a new car, you realize you can either lease the car or purchase it with a two-year loan. The car you want costs $34,000. The dealer has a leasing arrangement where you pay $97 today and $497 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 6 percent. You believe that you will be able to sell the car for $22,000 in two years. What is the present value of purchasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value of lease $ What is the present value of leasing the car? (Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.) Present value of purchase $ What break-even resale price in two years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your answer to 2…