Reference no: EM13890500
You can lease a car for $7,500 per year for 6 years. Or, you can purchase the car for $45,000 in cash today. If the cost of funds [what you can earn on your money] is 2.63%, is it cheaper to lease or purchase the car?
a. The PV [lease]= $47,385 > $45,000 to purchase the car; so, purchase the car.
b. The PV [lease] = $41,132 < $45,000 to purchase the car; so, lease the car.
c. The sum of lease payments $45,000 = $45,000 to purchase the car, so purchase the car.
d. The FV[Lease] = $48,065 > $45,000 to purchase the car, so lease the car.
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