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Anestetic [448]
3 years ago
7

Suppose that you have the option to buy the car with a 3 year car loan or lease the car during the same period of time. The 3 ye

ar lease option will require a $3,000 down payment and monthly payments of $350. If the salvage value of the new vehicle after 3 years is $5,000 and you can invest at a rate of return of 4%, what is your best option? (Ignore your old vehicle.)
Business
1 answer:
Len [333]3 years ago
3 0

Missing Question Data:

The question was missing the total amount of loan taken. I have found the question online and the missing data is added below.

Explanation:

DATA:

Car Loan = $15000

Interest Rate (annual) = 7% = 0.07

Interest Rate (monthly) = 0.07/12 = 0.00583

Loan Life = 3 years

Period (monthly) = 3*12 = 36

Investment Rate (annual) = 4% = 0.04

Investment Rate (monthly) = 0.04/12 = 0.00333

Salvage value after 3 years (PV of Salvage Value) = $5000

Lease Down Payment = $3000

Lease Monthly Payment = $350

<h3>First, we consider the option of Buying on Loan</h3>

Car Loan - Salvage Value(PV) = 15000-5000

Car Loan - Salvage Value(PV) = $10000

<h3>For the option of Leasing the Car</h3>

Sum of monthly lease payments for the total period will be,

Sum of Installments (FV) = 350 * 12 = $12600

We know that,

PV\;=\;\frac{FV}{(1\;+\;r)^{n}}\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;\;(here\;n\;=\;4\%\;=\;0.00333)

Sum of Installments (PV) = \frac{12600}{(1\;+\;0.00333)^{36}}

Sum of Installments (PV) = $11178.76

Total Lease Payment = Down Payment + Sum of Installments (PV)

Total Lease Payment = $3000 + $ 11178.76

Total Lease Payment = $14178.76

As we can see that total investment for Loan option is lower than that of Lease option, hence taking Loan is the best choice.

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5 0
3 years ago
Consider the following accounting terms and definitions and match each term to the definition: Accounting a. an economic resourc
spayn [35]
<h2><u>Answer:  </u></h2>

<u>Accounting</u>:

The basic tool of accounting, stated as asset=liabilities + equity (e)  

<u>Asset:</u>

An economic resource that is expected to be of benefit in the future (a)

<u>Balance sheet:</u>

Reports on an entity’s assets, liabilities, and stockholders’ equity as of a specific date (I)

<u>Expense:</u>

Decreases in equity that occur in the course of selling goods/services (f)

<u>Income statement:</u>

Reports on an entity’s revenues, expenses, and net income or loss for the period (j)

<u>Liability:</u>

Debts that are owed to creditors (b)

<u>Net income:</u>

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<u>Net loss:</u>

Excess of total expense over total revenues (c)  

<u>Revenue:</u>

Increase in equity that occur in the course of selling goods/services (g)

<u>Statement of cash flow:</u>

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8 0
3 years ago
Read 2 more answers
One year ago, you purchased 500 shares of stock for $22 a share. The stock pays $0.32 a share in dividends each year. Today, you
Vadim26 [7]

Answer:

Return on investment=12.81%

Explanation:

<em>Return on investment for a stock comprises of the capitals and dividend earned on the stock.</em>

<em>The capital gain is the difference between he cost of the shares when it was bought and the value when it is sold.</em>

Capital gain = (24.50 -22)× 500= 1250

Dividend earned for a year = 0.32× 500 =160

Total return = 1250  + 160 =1,410

Total return = $1,410

Cost of the shares= 11,000

Return on investment = total return/cost of shares× 100

                                     =1,410 /11,000 ×  100= 12.81

Return on investment=12.81%

3 0
3 years ago
Monique Products, a web-based company, maintains no manufacturing facilities. As orders come in, the company contracts with othe
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Answer:

The correct answer is: a virtual corporation.

Explanation:

Virtual corporations are becoming more common with the massification of the internet and communications. They are generally companies that are dedicated to the commercialization of products and generate a massive movement in the network that allows them to be in the "voice to voice" of people. They do not have physical facilities, which saves them expenses such as leasing and public services, and the contracted staff is minimal. These companies are based on the strategy of fast and massive shipments through transport companies in order to satisfy the needs of their clients.

8 0
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The decision to take less salary in a year when the company was less profitable and employees' pay was cut is an example of Nish
ollegr [7]

Answer: commitment

Explanation:

The Chief Executive Officer of Japan Airlines, who was Haruka Nishimatsu, was an example of a strategic leader who had a high performance.

The The decision to take less salary in a year when the company was less profitable and employees' pay was cut is an example of Nishimatsu commitment to the company.

4 0
3 years ago
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