Find the equivalent monthly cost over the life of the car

Assignment Help Finance Basics
Reference no: EM13943430

Your client needs a new car and is trying to decide whether to (1) buy and pay cash, (2) buy fully financed, or (3) lease. The following terms are available:
If the car is purchased for cash:
Cost new, $24,000
Factory rebate available immediately, $2,000
If car is purchased fully financed:
Cost new, $24,000
No down payment
100 percent financing by dealer at in = 6 percent, 36 monthly paymentsIf the same car is leased:
Monthly lease fee paid in advance at BOM (beginning of the month), $450 per month (the first payment is due now).
At the end of the 60-month lease period the client has an option to purchase the car for $1.00.
The client ordinarily invests and borrows at in = 12 percent compounded monthly, and expects to keep the car for 60 months.

a) Find the equivalent monthly cost over the life of the car of each of the three alternatives and select the lowest cost. (Disregard resale value at EOM 60, since it is the same in all three cases)

b) The dealer offers an additional bonus feature with the fully financed purchase offer where by the first payment is not due until EOM 4. Delivery of the car is made now, and interest at 6 percent accrues on the balance owed. The 36 monthly payments are calculated on the amount owed at EOM 3. Find the equivalent monthly cost over the life of the car of acquiring the car under this alternative.

Reference no: EM13943430

Questions Cloud

Case study-entrepreneurship and innovation : In the first tutorial, you will be asked to form a Study Group of 2-3 people for the purposes of leading a Case Study discussion in a Tutorial. The Cases you will find in your textbook Mazzarol, T., 2011,"Entrepreneurship and Innovation: Readings ..
Differences between quantitative and qualitative research : To help you organize your notes for this assignment, consider the following chart that provides an overview of differences between quantitative and qualitative research methodologies
How andres vs ymca case has impact sport facility managers : how this case has impacted sport facility managers today. Schneider v. American Hockey and Ice Skating Center, Inc. Body Max Fitness Center v. Sheffield. Olympia v. Johnson and Andres v. YMCA.
Heat transfer problem in a spherical cylinder : Non -zero heat flux component , since temperature changing in r - direction only , qr is present , the control volume , dr , as shown - Heat flux entering the control volume at r= r = qr = 4.π.r^2. qr|r
Find the equivalent monthly cost over the life of the car : Find the equivalent monthly cost over the life of the car of each of the three alternatives and select the lowest cost. (Disregard resale value at EOM 60, since it is the same in all three cases)
Write a program to construct and manipulate length objects : write a program to construct and manipulate Length objects that can handle any of the following units: meters, inches, feet, yards, miles.
Explain use of descriptive research within article study : The Effectiveness of Sign Prompts to Increase Hand Washing Behaviors in Restrooms Based on this article, answer the following: Explain the use of descriptive research within the article's study. Which aspects of this study would fall under the catego..
Difference between the two website forms : What was the main difference between the two website forms? Would the "NC Veterans Memorial" website benefit from the use of a Contact Us form? If so, why, and what fields should be included in the form?
Conceptual frameworks of the management : Understand theories and conceptual frameworks of the management of individual and organisational change

Reviews

Write a Review

Finance Basics Questions & Answers

  Financial reporting and analysis

Finance is about Gunns Ltd, a company in dealing with forestry products in Australia. The company has also been listed in Australian Stock Exchange. As many companies producing forestry products, even Gunns Ltd is facing various problems. Due to the ..

  A report on financial accounting

This report is specific for a core understanding for Financial Accounting and its relevant factors.

  Describe the types of financial ratios

Describe the types of financial ratios and other financial performance measures that are used during venture's successful life cycle.

  Differences between sole proprietorship and corporation

Briefly describe the major differences between a sole proprietorship and a corporation

  Prepare a cash budget statement

Calculate the expected value of the apartment in 20 years' time. What is the mortgage loan repayment at the beginning of each month

  What are the implied interest rates

What are the implied interest rates in Europe and the U.S.?

  State pricing theory and no-arbitrage pricing theory

State pricing theory and no-arbitrage pricing theory

  Small business administration

Identify the likely stage for each venture and describe the type of financing each venture is likely to be seeking and identify potential sources for that financing.

  Effect of financial leverage

The Effect of Financial Leverage and working capital management

  Evaluate the basis for the payment to the lender

Evaluate the basis for the payment to the lender and basis for the payment to the company-counterparty.

  Importance of opps, ipps, mpfs and dmepos

Research and discuss the differences and importance of : OPPS, IPPS, MPFS and DMEPOS.

  Time value of money

Time Value of Money project

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd