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problem: A graduated engineer has accepted a lucrative job. He will travel frequently in the new position & has decided to obtain a new vehicle. He would like to have a vehicle that will last ten years before replacement is necessary. After much investigates, he has settled on three options:

[A] Buy a vehicle for 19,999 dollar in cash now.

[B] Buy a vehicle now by paying $0 down and making payments of $6,500 for sixty months.

[C] Lease a vehicle now for a down payment of 1,000 dollar and monthly payments of $299.00 for sixty months. The leased vehicle will be worth 6,500 dollar at the end of the five year period, at which time the engineer will buy the car for $6,500.

In all three cases, the vehicle can be sold at the end of ten (10) years for $2,000.

Create a choice table for 0% to 50% interest. Suppose that i = 9% and apply an incremental rate of return analysis to determine which option the engineer should select.

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M919678

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