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You have decided you need a truck in your business. You are looking at a Ford Ranger. You have got some quotes for both leasing and purchasing a vehicle from Broadway Ford. The information is given below. Your after tax cost of capital is 7%. The tax rate is 30%. A pickup is considered a 5 year property. What are the NPV’s for the two alternatives? Which would you choose and why?

Purchase Cost: $24,490 with tax and title

Down: 0% Finance rate: 6.99 % per year

Payments: 3 Salvage value: $9,660

Lease Lease payments $4,319 per year for 3 years.

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M92751067

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