Respuesta :
Answer:
Ans. The total cash outflow for buying a -$34,000 vehicle is -$44,680, and for leasing the same vehicle is -$33,360
b) Based on the answers in part a), the best choice is leasing the vehicle.
Explanation:
Hi, well, we have 3 options here, 1) get a loan for a car, 2) lease that car, 3) lease and keep the car.
In order to find the cash outflow for each alternative, we have to add up all the negative cash flows, that is
Option 1 (loan)
[tex]OutFlow=DownPayment+PMTs*Length=-5,800-38,880=-44,680[/tex]
Option 2 (just lease)
[tex]OutFlow=DownPayment+PMTs*Length=-2,100-29,760=-31,860[/tex]
Option 3 (Lease Buying)
[tex]OutFlow=DownPayment+PMTs*Length+FinalPMT=-2,100-29,760-1,500=-33,360[/tex]
As you can see, the lowest outflow of money is in the case you just lease the car.
The loan option is the worst one, since you pay for a $34,000 vehicle the amount of $44,680.
Best of luck.
Answer:
Lease option would cost $32,910
Buy option would cost $33,880
The lease option would $970 less than the buy option($32,910-$33,880),hence lease option is preferable.
Explanation:
Buy option lease option
Down-payment $5,800 $2,100
Monthly payment($810*48)/($620*48) $38,880 $29,760
Salvage value ($10,800) -
End of lease charges - $1,050
Total cash outflows $33,880 $32,910
From a cash flow point of view,the lease option would $970 less than the buy option($32,910-$33,880),hence lease option is preferable.
Note that the monthly payment lasts for 48 months in each of the two cases,hence the monthly payment was multiplied by 48 in order to arrive at total monthly repayments.
The value of the vehicle at end of loan repayment is an income ,hence it was deducted from the cost.
