What will be your monthly payments on the loan

Assignment Help Financial Management

Reference no: EM131621151

You need a new car. You can either lease or buy the car for 345000 SEK. In both cases you expect to use the car for 5 years. It will have a residual value of 120000 SEK after 5 years. You can borrow at a rate of 1.5%.

(a) In case you buy the car you will take an annuity loan over 5 year at a borrowing rate of 1.5%. What will be your monthly payments on the loan?

The monthly payments on the loan will be SEK. (round to SEK, no decimals, no comma as thousand separator)

(b) In case you decide to lease the car from a car dealer, what monthly rate will the dealer charge assuming a perfect market?

The monthly payments on the lease will be SEK. (round to SEK, no decimals, no comma as thousand separator)

(c) You remember the corporate finance classes at JIBS that you took long time ago and you recognize that a comparison of the rates from (a) and (b) is not meaningful, in particular since in (a) you will own the car and you could sell it at its residual value. Furthermore, you also notice that you can deduct the interest payments on the loan from your income tax so that the after-tax interest rate is 0.7 times the pre-tax rate. The residual value shall be used to make a balloon payment on the remaining loan amount to repay it completely. What will be your monthly payments considering both the balloon loan repayment using the residual amount and also the tax consequences from interest payments?

The monthly payments on the loan will be in this case SEK. (round to SEK, no decimals, no comma as thousand separator)

Reference no: EM131621151

Questions Cloud

What effectiveness approach would you prefer : What types of organizational activities do you believe are most likely to be outsourced? How would you proceed? What effectiveness approach would you prefer?

How effective is honda international financial strategy : How effective is Honda’s international financial strategy? What do you believe will be the future result of continuing to follow this strategy?

How can graphs be used to describe and summarize data : A researcher is studying reading rates in milliseconds per syllable. What scale of measurement-nominal, ordinal, interval, or ratio-is time in milliseconds?

How much is the new salary of an employee : A container of oil holds 585 gallons. How many containers each holding 4.5 gallons will be needed if all the oil is to be transferred to the smaller containers?

What will be your monthly payments on the loan : In case you buy the car you will take an annuity loan over 5 year at a borrowing rate of 1.5%. What will be your monthly payments on the loan?

What is the main health challenges facing africa today : 1. What is the main health challenges facing Africa today? 2. How does Aids effect African economic development?

Discuss delivery of software to compute-a-rama : Oxford Software and Compute-a-Rama contract for Oxford's delivery of software to Compute-a-Rama. Oxford learns of Compute-a-Rama's in-solvency while goods

Challenges facing agricultural production in africa : 1. What are the main challenges facing agricultural production in Africa?

Determine how the process might be approached differently : Determine how the process might be approached differently for each employee to produce the best results. Use scenarios to convey your idea.

User Account

All Pages