Reference no: EM131918842

Maria is trying to decide between two different lease options for the a new car: 1) lease a used car for $7,500, or 2) lease a new car for $10,000. The new car is still under warranty, so the lease cost covers all repair expenses. However, Maria would be responsible for any repair expenses if she leases the used car. Maria believes there is a 25% chance that there will be no need for repairs with the used car, but also thinks there is a 50% chance that some repairs ($2,000) could be needed, and a 25% chance that significant repairs ($5,000) might be required.

What is her best lease option? Why?

a.She is indifferent between the two options.

b.She should lease the new car because of the slightly lower costs ($10000 vs. $10750).

c.She should lease the new car, because the expected repairs of $1250 are too high.

d.She should lease the used car. Her expected expenditures are $9750.