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After deciding to buy a new car, you can either lease the car or purchase it with a four-year loan. The car you wish to buy costs $33,500. The dealer has a special leasing arrangement where you pay $96 today and $496 per month for the next four years. If you purchase the car, you will pay it off in monthly payments over the next four years at an APR of 7 percent. You believe that you will be able to sell the car for $21,500 in four years.

What is the present value of purchasing the car?

What is the present value of leasing the car?

What break-even resale price in four years would make you indifferent between buying and leasing?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91265451

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