Question

You need a truck, which you can either buy or lease. You can buy the truck...

You need a truck, which you can either buy or lease. You can buy the truck for $45,000 and sell it after 6 years for $8,000. What is the maximum amount that you would pay per year to lease rather than to buy if the discount rate is 8 percent per year? Assume that the lease payments are annual and payable at the beginning of each year. Select one: a. $7,959 b. $8,003 c. $8,643 d. $8,789 e. $8,223

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
Particulars Amount in $ NOTE
Purchase price of truck     45,000.00 Year Discount factor@8%
Less: Present value of salvage       5,041.36 (8000*0.63017) 1 0.925925926
Cost of buying     39,958.64 2 0.85733882
3 0.793832241
Maximum amount would pay per year to lease rather then buy is       8,643.66 (39958.64/4.62288) 4 0.735029853
5 0.680583197
So the correct answer is option C i.e. $8,643 6 0.630169627
Annuity value 4.622879664
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
You need a truck, which you can either buy or lease. You can buy the truck...
You need a truck, which you can either buy or lease. You can buy the truck for $45,000 and sell it after 6 years for $8,000. What is the maximum amount that you would pay per year to lease rather than to buy if the discount rate is 8 percent per year? Assume that the lease payments are annual and payable at the beginning of each year
1. You need a new car. You can either purchase one outright for $15,000 or lease...
1. You need a new car. You can either purchase one outright for $15,000 or lease one for 7 years for $3,000 a year. If you buy the car, you can sell it in 7 years for $500. The discount rate is 10%. Should you buy or lease? What is the maximum lease payment you would be willing to pay?
After deciding to buy a new car, you can either lease the car or purchase it...
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 buy a new car, you can either lease the car or purchase it...
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...
You need a new car. You can either lease or buy the car for 355 000...
You need a new car. You can either lease or buy the car for 355 000 SEK. In both cases you expect to use the car for 5 years. It will have a residual value of 120 000 SEK after 5 years. You can borrow at a rate of 2.5% APR with monthly compounding. (a) In case you buy the car you will take an annuity loan over 5 year at a borrowing rate of ${col}%. What will be your...
After deciding to get a new car, you can either lease the car or purchase it...
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...
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...
Q.3 Your landscapping company can lease a truck for $8,000 a year(paid at year-end) for six...
Q.3 Your landscapping company can lease a truck for $8,000 a year(paid at year-end) for six years. It can instead buy the truck for $40,000. The truck will be valueless after six years. If the interest rate you company can earn on its funds is 7%, is it cheaper to buy or lease?
Lease Master is prepared to lease you a truck for two years for a 15 percent...
Lease Master is prepared to lease you a truck for two years for a 15 percent return on its investments. The lease payments are to be made at the beginning of the year. The truck, which has a useful economic life of six years, cost $60,000. Its estimated value in two years is $17,000. The CCA rate is 30 percent, and Koss’s tax rate is 25 percent. Calculate the annual lease payment required by Koss Leasing round the final answer...
Aztec College needs a new computer. It can either buy it for $250,000 or lease it...
Aztec College needs a new computer. It can either buy it for $250,000 or lease it from Macrolease company. The lease terms require Aztec to make six annual payments (prepaid) of $62,000. Macrolease needs to pay six annual maintenance costs (prepaid) of $10,000. Macrolease pays tax at 40%. Macrolease can depreciate the computer for tax purposes over 5 years starting from year 1. The computer will have a residual value of $50,000 at the end year 5. Macrolease’s before tax...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT