Your landscaping company can lease a truck for $8,200 a year (paid at year-end) for 5 years. It can instead buy the truck for $35,000. The truck will be valueless after 5 years. The interest rate your company can earn on its funds is 6%. a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Is it cheaper to buy or lease? c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Is it now cheaper to buy or lease?
Your landscaping company can lease a truck for $8,200 a year (paid at year-end) for 5 years. It can instead buy the truck for $35,000. The truck will be valueless after 5 years. The interest rate your company can earn on its funds is 6%. a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Is it cheaper to buy or lease? c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Is it now cheaper to buy or lease?
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
Your landscaping company can lease a truck for $8,200 a year (paid at year-end) for 5 years. It can instead buy the truck for $35,000. The truck will be valueless after 5 years. The interest rate your company can earn on its funds is 6%.
a. What is the
b. Is it cheaper to buy or lease?
c. What is the present value of the cost of leasing if the lease payments are an
d. Is it now cheaper to buy or lease?
Transcribed Image Text:Your landscaping company can lease a truck for $8,200 a year (paid at year-end) for 5 years. It can instead
buy the truck for $35,000. The truck will be valueless after 5 years. The interest rate your company can
earn on its funds is 6%.
a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your
answer to 2 decimal places.)
b. Is it cheaper to buy or lease?
c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first
payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal
places.)
d. Is it now cheaper to buy or lease?
а.
Present value of lease
b.
Is it cheaper to buy or lease?
c.
Present value of lease
d.
Is it now cheaper to buy or lease?
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