Compare the alternatives on an annual amount basis

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Reference no: EM131326943

An individual is considering leasing a new car. The initial cost of the car is $18,000 with an estimated life of 5 years and residual salvage value of $4,000 at that time. The car dealer has suggested that the car can be leased for $375 per month for the same period of time. If the operating expenses are the same for the purchases under both alternatives, what is the best alternative? The individual wants to earn 10% on the investment. Compare the alternatives on an annual amount basis. Can incremental analysis be used?

Reference no: EM131326943

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