Please use the following facts to analyze the next two questions: Facts and Assu
ID: 2619828 • Letter: P
Question
Please use the following facts to analyze the next two questions: Facts and Assumptions: Lease Term in Months 24 Lease Down Payment $ 500.00 Monthly Lease Payments $ 300.00 Sales Tax Rate 8% Lease Buyout at End $ 15,000.00 Title Fee $ 25.00 Car Loan Market Rate 7% Outright Purchase Price Before Tax and Title $ 19,500.00 1. What is the NPV of the lease? Round you answer to the nearest whole number. Do not use $, commas, or decimal points and enter as a positive number. For example, -$34,567.50 would be entered as 34568. 2. What would it cost you to buy the car today if you were paying cash? Round you answer to the nearest whole number. .
Explanation / Answer
Down Payment $500.00 Lease Term 24 Lease Payments $300.00 Buy Out Price - End of Lease $15,000.00 Market Loan Rate 7.00% Sales Tax 8.00% Title Fee $25.00 Outright Purchase of Car *before tax and title* $19,500.00 Down Payment $500 Present Value of Lease Payment =PV(7%/12,24,-$300) $6,700.53 NPV $7,200.53 b) Net Cost of buying car Today $21,166.39 Year Lease Down Payment Sales Tax = 15000 x 8% Monthly Lease Payments Buy Out Price - End of Lease Net Cash Flow 0 $500.00 $500.00 1 $300.00 $300.00 2 $300.00 $300.00 3 $300.00 $300.00 4 $300.00 $300.00 5 $300.00 $300.00 6 $300.00 $300.00 7 $300.00 $300.00 8 $300.00 $300.00 9 $300.00 $300.00 10 $300.00 $300.00 11 $300.00 $300.00 12 $300.00 $300.00 13 $300.00 $300.00 14 $300.00 $300.00 15 $300.00 $300.00 16 $300.00 $300.00 17 $300.00 $300.00 18 $300.00 $300.00 19 $300.00 $300.00 20 $300.00 $300.00 21 $300.00 $300.00 22 $300.00 $300.00 23 $300.00 $300.00 24 1200 $300.00 $15,000.00 $16,500.00 NPV = NPV(7%/12,(Net cash flow year 0 to Net Cash flow year 24) $21,166.39