UPENN: LOOSE LEAF CORP.FIN W/CONNECT
17th Edition
ISBN: 9781260361278
Author: Ross
Publisher: McGraw-Hill Publishing Co.
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Chapter 21, Problem 16QP
Automobile Lease Payments Automobiles arc often leased, and there are several terms unique to auto leases. Suppose you are considering leasing a car. The price you and the dealer agree on for the car is $32,000. This is the base capitalized cost. Other costs that may be added to the capitalized cost price include the acquisition (bank) fee, insurance, or extended warranty. Assume these costs are $450. capitalized cost reductions include any down payment, credit for a trade-in, or dealer rebate. Assume you make a down payment of $2,000, and there is no trade-in or rebate. If you drive 12,000 miles per year, the lease-end residual value for this car will be $17,000 after three years.
The lease or "money" factor, which is the interest rate on the Joan, is the APR of the loan divided by 2,400. The money factor of 2,400 is the product of three numbers: 2, 12, and 100. The 100 is used to convert the APR, expressed as a percentage, to a decimal number. The 12 converts this rate to a monthly rate. Finally, the monthly rate is applied to the sum of the net capitalization cost plus the residual. If we divide this sum by 2, the result is the average anticipated book value. Thus, the end result of the calculation using the money factor is to multiply a monthly rate by the average book value to get a monthly payment. The lease factor the dealer quotes you is .00215.
The monthly lease payment consists of three parts:
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Chapter 21 Solutions
UPENN: LOOSE LEAF CORP.FIN W/CONNECT
Ch. 21 - Leasing vs. Borrowing What are the key differences...Ch. 21 - Leasing and Taxes Taxes are an important...Ch. 21 - Leasing and IRR What arc some of the potential...Ch. 21 - Leasing Comment on the following remarks: a....Ch. 21 - Accounting for Leases Discuss the accounting...Ch. 21 - IRS Criteria Discuss the IRS criteria for...Ch. 21 - Off- Balance Sheet Financing What is meant by the...Ch. 21 - Sale and Leaseback Why might a firm choose to...Ch. 21 - Leasing Cost Explain why the aftertax borrowing...Ch. 21 - Leasing vs. Purchase Why wouldnt Azul Linhas Arcas...
Ch. 21 - Reasons to Lease Why would ILFC be willing to buy...Ch. 21 - Leasing What do you suppose happens to the plane...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Prob. 7QPCh. 21 - Prob. 8QPCh. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Use the following information to work Problems...Ch. 21 - Debt Capacity Monster Magnet Manufacturing is...Ch. 21 - Setting the Lease Price An asset costs 720,000 and...Ch. 21 - Lease or Buy Wolfson Corporation has decided to...Ch. 21 - Setting the Lease Price An asset costs 590,000 and...Ch. 21 - Automobile Lease Payments Automobiles arc often...Ch. 21 - Prob. 17QPCh. 21 - Lease or Buy High electricity costs have made...Ch. 21 - THE DECISION TO LEASE OR BUY AT WARF COMPUTERS...Ch. 21 - DECISION TO LEASE OR BUY AT WARF COMPUTERS Warf...Ch. 21 - DECISION TO LEASE OR BUY AT WARF COMPUTERS Warf...Ch. 21 - DECISION TO LEASE OR BUY AT WARF COMPUTERS Warf...
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