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After deciding to buy a new car, you can either lease the car or purchase it on a 5-year loan. The dealer has a special leasing arrangement where you pay $1,000 at the beginning of each month (starting from today) for the next 5 years. If you purchase the car, you will pay $3,000 today and pay it off in monthly payments (starting one month from today) of $1,200 over the next 5 years at a 6.0% APR. You believe you will be able to sell the car for $25,000 in 5 years. (a) Should you buy or lease the car? (b) What break-even resale price in 5 years would make you indifferent between buying and leasing?

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92810330

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