What discount rate would the graduate be indifferent

Reference no: EM133432404

Question: A young graduate is trying to decide whether to lease or buy a car for the next three years. The cash flows for each choice are shown below. (We will ignore gas, insurance, and tag fees.)

YEAR 0 1 2 3
LEASE -$4,387.00 -$3,500.00 -$3,500.00 -$3,500.00
PURCHASE -$36,361.00 0 0 $22,382.00

The graduate has a personal discount rate of 7.00%.

At what discount rate would the graduate be indifferent between the two choices?

Reference no: EM133432404

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