Reference no: EM132144527

Aldo plans to purchase an F-150 Ford pickup truck for $21,000.  He has the cash and if he does not spend it on a truck, it will sit in his money market account earning 0.1% per month. Ford is offering a lease-with-an-option-to-by plan, which requires a $3,000 down payment (up front) and then payments at the end of each of the next 36 month of $259. At the end of the third year, he has the option to purchase the truck for $10,000.

(a) Assuming Aldo plans to exercise the purchase option, should he (circle the correct answer - no explanation needed - but you will need to solve (b to answer the question)

i. By the truck outright or

ii. acquire it via the lease/buy option?

(b) In present value dollars, how much better off is he doing the right thing rather than the wrong thing? Be sure to show your work and explain your answer.