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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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Answer:

Managing

Explanation:

Managing involves effectively utilising an organisation's resources and bringing employees together to meet set goals and objectives.

Good management helps create a dynamic team where employees collaborate and give their best to achieve collective goal.

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Answer:

a. Predetermined administration costs - $ 54 per engineering hours

b. Profit per Toot  - $ 648,075

   Profit per Tix       $ 326,450

Explanation:

Computation for predetermined overhead rate for admin costs

Estimated administration costs                                              $ 629,100

Engineering hours - Toot -  6,825

Engineering hours - Tix    -  <u>4,825</u>

Total engineering hours                                                              11,650

Predetermined rate for administration costs

$ 629,100/ 11,650 hours                                                       $ 54 per hour

Computation of total profit for each service

Administration costs - Toot = 6,825 hours * $ 54 per hour = $ 368,550

Administration costs - Tix =   4,825 hours * $ 54 per hour = $  260,550

                                                              Toot                Tix

                                                                 $                    $

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Engineering costs                                 333,375           453,000

Allocation of admin costs                     <u>368,550 </u>         <u>260,550</u>

Total costs                                              <u>701,925 </u>          <u>713,550</u>

Profit per service                                    648,075          326,450                          

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Answer:

The examples of the given circumstances are provided below.

Explanation:

<u>Interpretations of how the international corporation (including such Unilever) was indeed changing the distribution platform</u>:

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<u>Interpretations of how and why the International Corporation is changing targeted advertising</u>:

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Answer:

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Answer:

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The perpetuities can becalculate as follow

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1 - 0

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\frac{Principal}{(1 + rate)^{time} } = PV

Here if time increases, then the divisor get closer to ∞ so we have

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So the first cashflow is more relevant than the more distant cash flow

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