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What is the present value of the cost of buying

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Reference no: EM131829423

You can buy a new car for $22,000 (including taxes), and your after-tax cost of borrowing is 9.0% APR (monthly compounding). Alternatively, you can lease the car for 36 months for $700 at signing, then $382 per month (including taxes). The lease has a residual value of $10,000 (including taxes). Your plan is to have the car for 5 years total, and then sell it for an estimated $7,000.

a.) What is the present value of the cost of buying?

b.) What is the present value of the cost of leasing?

c.) Should you buy the car or lease it?

Please show supporting work for the total present value cost of buying and separately also for leasing.

Please include any potential financial calculator input using the time value of money keys. Any financial calculator key input (aside from showing algebraic work) should be limited to I (interest rate), PMT (Payment), PV (present value), FV (future value), and N (number of periods of payment). "Cash flow" key input (e.g. "CF" on many calculators) is not acceptable. Nor is showing excel input.

Reference no: EM131829423

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