What would be the monthly lease payment to remain even

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Reference no: EM131234233

The discount rate is 12.68% per annum. Your competitor offers a 5-year airplane lease for an upfront cost of $30,000. The lessee will have to pay $3,000 per year in insurance (each year in advance) and service costs, and $3,000 per month lease fees.

(a) What is the customer's equivalent monthly cost of leasing an airplane?

(b) Your boss believes that customers would prefer a 4-year lease to a 5-year lease if it saves on lease payments. Assume insurance (of $3,000 per year) and upfront lease payment (of $30,000) stay the same. What would be the monthly lease payment to remain even?
(Assume that your customers can compute net present values and that airplanes do not age.)

Reference no: EM131234233

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