Which method should he use to obtain it

Reference no: EM132160453

Question: Claude James, a salesman, needs a new car for business use. He expects to be promoted to a supervisory job at the end of 3 years, and he will no longer be "on the road." The company reimburses salesmen each month at the rate of 55c per mile driven. Claude finds that there are three different ways of obtaining his chosen car: A. Pay cash: the price is $26,000. B. Lease the car: the monthly charge is $700 on a 36-month lease, payable at the end of each month; at the end of the 3-year period, the car is returned to the leasing company.

C. Lease the car with an option to buy at the end of the lease: pay $720 a month for 36 months; at the end of that time, Claude could buy the car, if he chooses, for $7000.

Claude believes he should use a 12% interest rate. If the car could be sold for $7500 at the end of 3 years, which method should he use to obtain it?

Reference no: EM132160453

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