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You can lease a car for $7,500 per year for 6 years. Or, you can purchase the car for $45,000 in cash today. If the cost of funds [what you can earn on your money] is 2.63%, is it cheaper to lease or purchase the car?

a. The PV [lease]= $47,385 > $45,000 to purchase the car; so, purchase the car.

b. The PV [lease] = $41,132 < $45,000 to purchase the car; so, lease the car.

c. The sum of lease payments $45,000 = $45,000 to purchase the car, so purchase the car.

d. The FV[Lease] = $48,065 > $45,000 to purchase the car, so lease the car.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M91564584

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