Solution-Do prefer the lease or the loan

Do prefer the lease or the loan

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You receive a $24,000 car LEASE at 5.6% nominal annual interest for 4 years. Interest is compounded monthly and you make monthly payments. Your RESIDUAL value at the end of your lease is $7,200. Assume LEASE payments are made at the END of the month, with the first payment due at the end of the 1st month.

You can also get a LOAN for the same terms (although you will pay off the entire car in 4 years).

Question 1: Assume your MARR (or your investment interest rate) is 3% nominal annual, compounded monthly as well. Do you prefer the LEASE or the LOAN? Enter the present value of the alternative that you should choose. Don't forget to include that you have a car worth $7,200 if you go with the LOAN alternative.

Reference no: EM132633822

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Do prefer the lease or the loan

Reference no: EM132633822

Reference no: EM132633822

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