Question

it's time for a new car, to be used for business use, of course. You only need it for 3 years before you'll want to start looking for something else, and you've got three options, described below. In options A and B, the car may be sold at the end of 3 years for $7500. Given a 12% interest rate, compounded MONTHLY (so think about how many periods you have, too), compute the EUAC for option A:

Option A: Buy it: Just buy the car with cash - $26,000.

Option B: Lease-to-own: Lease the car at a monthly charge of $720 per month, payable at the end of each month, for 36 months. You can buy the car at the end of the lease period for a cost of $7000. <Remember, you can sell the car for $7500 in this and the previous option>

Option C: Lease-and-return: Lease the car for $700 per month, payable at the end of each month, with no money down. At the end of the lease, the car is returned to the leasing company.

Find option B also for euac

Answer #1

Option A: Buy the car with cash - $26,000 and sell it at the end of 3 years or 36 months for $7500. Find EUAC at 12% interest rate, compounded MONTHLY so that effective rate is 1% per month

EUAC = 26000(A/P, 1%, 36) – 7500(A/F, 1%, 36)

= 26000*0.0332 – 7500*0.0232

= $689

Option B: Lease-to-own: Lease the car at a monthly charge of $720 per month, payable at the end of each month, for 36 months. You can buy the car at the end of the lease period for a cost of $7000.

EUAC = 720 + 7000(A/F, 1%, 36) – 7500(A/F, 1%, 36)

= 720 + (7000 – 7500)*0.0232 = 708

Option C: Lease-and-return: Lease the car for $700 per month

EUAC = $700.

Option A is least expensive so select A.

Congratulations - it's time for a new car, to be used for
business use, of course. You only need it for 3 years before you'll
want to start looking for something else, and you've got three
options, described below. In options A and B, the car may be sold
at the end of 3 years for $7500. Given a 12% interest rate,
compounded MONTHLY (so think about how many periods you have, too),
compute the EUAC for option A:
Option...

Suppose that you have the option to lease a new car, which you
otherwise intend to purchase for $21,000. The lease terms: $3000
down and payments of $304 per month for 48 months, at the beginning
of each month. Upon termination, you can purchase the car for an
addition payment of $7000 at lease expiration. If your financing
rate is 5.6% APR, and you discount the lease-purchase option using
that same rate, how much will pay to buy car (in...

Suppose you can buy a new car for $15,000 and sell it for $6,00
after six years. Or, you can lease the car to $300 per month for
three years and return it at the end of the three years. Assume
that lease payments are made yearly instead of monthly (i.e., are
$3,600 per year for each of the three years).
a.) If the interest rate, r, is 4 percent, should you lease or
buy?
b.) What if the interest...

2a. Two different leasing options are listed below for a Jeep
Wrangler (worth $27,995 new). How much more must be paid in monthly
fees over the full 4 years to take option B (rather than option A)?
What is that extra money getting you?
Option A: Take out a 4-year lease. That is, drive the same car
for 4 years paying a monthly fee of $247.28, then turn the car
in.
Option B: Take out two consecutive 2-year leases. That...

After deciding to buy a new car, you can either lease the car or
purchase it on a two-year loan. The car you wish to buy costs
$32,000. The dealer has a special leasing arrangement where you pay
$93 today and $493 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 7 percent. You believe you will be able
to...

After deciding to buy a new car, you can either lease the car or
purchase it with a three-year loan. The car costs $30,000. The
dealer has a lease program where you pay $100 today and $400 per
month for the next three years. If you purchase the car, you will
pay it off in monthly payments over the next three years at a 8
percent APR. You believe that you will be able to sell the car for
$20000...

After deciding to get a new car, you can either lease the car or
purchase it with a four-year loan. The car you wish to buy costs
$37,000. The dealer has a special leasing arrangement where you pay
$103 today and $503 per month for the next four years. If you
purchase the car, you will pay it off in monthly payments over the
next four years at an APR of 7 percent, compounded monthly. You
believe that you will...

After deciding to buy a new car, you can either lease the car or
purchase it on a three-year loan. The car you wish to buy costs
$32,500. The dealer has a special leasing arrangement where you pay
$94 today and $494 per month for the next three years. If you
purchase the car, you will pay it off in monthly payments over the
next three years at an APR of 6 percent. You believe you will be
able to...

: For a typical 36-month lease on a car valued at $30,000, the
monthly charge is about $600. At the end of the 36 months, the car
is returned to the lease company. As an alternative, the same car
could be bought with no down payment and 36 equal monthly payments,
with a monthly interest rate of 1%. At the end of 36 months, the
car would be fully paid for. The car would then be worth about half
its...

After deciding to get a new car, you can either lease the car or
purchase it with a four-year loan. The car you wish to buy costs
$35,500. The dealer has a special leasing arrangement where you pay
$100 today and $500 per month for the next four years. If you
purchase the car, you will pay it off in monthly payments over the
next four years at an APR of 7 percent, compounded monthly. You
believe that you will...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 1 minute ago

asked 1 minute ago

asked 5 minutes ago

asked 7 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 9 minutes ago

asked 12 minutes ago

asked 12 minutes ago

asked 15 minutes ago

asked 15 minutes ago