LEASE and LOAN payments and subtract these two values

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Reference no: EM132070605

You receive a $25,000 car LEASE at 6% nominal annual for 3 years. Interest is compounded monthly and you make monthly payments. Your Residual value at the end of your lease is $15,000. Assume LEASE payments are made at the END of the month, (first payment due end of first month). You can also get a LOAN for the same terms (although you will pay off the entire car in 3 years).

Assume your MARR for investment is 4% annual (compounded monthly as well).

Compute the PV of your LEASE and LOAN payments and subtract these two values. Enter this difference as a POSITIVE value if the LOAN is better or a NEGATIVE value if the LEASE is better.

For example, if the PV of the LOAN was $12,000 and the PV of the LEASE was $11,500 then the Lease is cheaper so you would enter -500.

Reference no: EM132070605

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