Answer:
net present value = 15452.63
present value of future monthly payment = 11301.56
resale price= 31151.05
Explanation:
given data
buy costs = $38,500
monthly rate = 7 % =
no of period = 2 × 12 = 24
solution
we find present value of resale is
present value = ![\frac{26500}{(1+(\frac{0.07}{12}))^{24}}](https://tex.z-dn.net/?f=%5Cfrac%7B26500%7D%7B%281%2B%28%5Cfrac%7B0.07%7D%7B12%7D%29%29%5E%7B24%7D%7D)
present value = 23047.37
so
net present value of purchase car is = purchase cost - present value
net present value = 38500 - 23047.37 = 15452.63
and
present value of future monthly payment is
present value of future monthly payment = 506 ×![\frac{(1-(1+(\frac{0.07}{12}))^{-24}}{\frac{0.07}{12}}](https://tex.z-dn.net/?f=%5Cfrac%7B%281-%281%2B%28%5Cfrac%7B0.07%7D%7B12%7D%29%29%5E%7B-24%7D%7D%7B%5Cfrac%7B0.07%7D%7B12%7D%7D)
present value of future monthly payment = 11301.56
so present value of leasing car = today payment + present value of future monthly payment
resent value of leasing car = 106 + 11301.56
resent value of leasing car = 11407.56
we consider resale price = x
so break even sale price = 38500 - ![\frac{x}{(1+(\frac{0.07}{12})^{24}}](https://tex.z-dn.net/?f=%5Cfrac%7Bx%7D%7B%281%2B%28%5Cfrac%7B0.07%7D%7B12%7D%29%5E%7B24%7D%7D)
solve we get
x = 31151.05
so resale price= 31151.05