1answer.
Ask question
Login Signup
Ask question
All categories
  • English
  • Mathematics
  • Social Studies
  • Business
  • History
  • Health
  • Geography
  • Biology
  • Physics
  • Chemistry
  • Computers and Technology
  • Arts
  • World Languages
  • Spanish
  • French
  • German
  • Advanced Placement (AP)
  • SAT
  • Medicine
  • Law
  • Engineering
jeyben [28]
2 years ago
8

Suppose that you have the option to lease a new car, which you otherwise intend to purchase for $21,000. The lease terms: $3000

down and payments of $298 per month for 48 months, at the beginning of each month. Upon termination, you can purchase the car for an addition payment of $7000 at lease expiration. If your financing rate is 5.4% APR, and you discount the lease-purchase option using that same rate, how much will pay to buy car (in present-value terms) using the lease-purchase option
Business
1 answer:
slava [35]2 years ago
5 0

Answer:

The amount that will be paid to buy the car is $18,539.43.

Explanation:

This can be calculated using the following 3 steps:

Step 1: Calculation of the present of the monthly payment

Since the payments are made at the beginning of each month, this can be calculated using the formula for calculating the present value (PV) of annuity due given as follows:

PVM = P * ((1 - (1 / (1 + r))^n) / r) * (1 + r) .................................. (1)

Where;

PVM = Present value monthly payments = ?

P = Monthly withdraw = $298

r = monthly financing rate = Financing rate / Number of months in a year = 5.4% / 12 = 0.054 / 12 = 0.0045

n = number of months = 48

Substitute the values into equation (1), we have:

PVM = $298 * ((1 - (1 / (1 + 0.0045))^48) / 0.0045) * (1 + 0.0045) = $12,896.55

Step 2: Calculation of the present of the purchase amount at lease expiration

This can be calculated using the present value formula as follows:

PVP = P / (1 + r)^n  .................................. (2)

Where;

PVP = Present value of the purchase amount at lease expiration = ?

P = Purchase amount at lease expiration = $7000

r = monthly financing rate = Financing rate / Number of months in a year = 5.4% / 12 = 0.054 / 12 = 0.0045

n = number of months = 48

Substitute the values into equation (2), we have:

PVP = $7000 / (1 + 0.0045)^48 = $5,642.88

Step 3: Calculation of the amount that will be paid to buy the car

This can be calculated as follows:

Amount to pay to buy car = PVM + PVP ............... (3)

Where:

PVM = Present value monthly payments = $12,896.55

PVP = $5,642.88

Substitute the values into equation (3), we have:

Amount to pay to buy car = $12,896.55 + $5,642.88 = $18,539.43

Therefore, the amount that will be paid to buy the car is $18,539.43.

You might be interested in
What is the practice of partying in the stadium parking lot before an event?
zimovet [89]
It is called tailgating.

8 0
3 years ago
Read 2 more answers
The ___ show(s) the quantity of a good consumers would be willing and able to purchase at a given time for a range of prices whi
finlep [7]

Answer:

a) demand curve and demand schedule

Explanation:

A demand schedule is actually a table while a demand curve is a graph. Understanding the difference between the two of them is important in answering this question but both show different quantities of goods that consumers are willing to buy at different prices. An important assumption is that other factors affecting the quantity demanded are held constant. In summary, a demand schedule shows this relationship in a tabular form while demand curve shows it in a graphical form.

3 0
3 years ago
In a fee-for-service health insurance plan with a $6,500 annual deductible, _____.
In-s [12.5K]

Answer:

A.

Explanation:

3 0
2 years ago
Acme Company carries an additional level of inventory beyond the expected demand during reorder lead times. This additional inve
Sauron [17]

Answer:

Safety stock

Explanation:

Safety stock is a stock that eplains the level of an additional stock in order to reduce the stockout risk i.e. there is a chances when the raw material is in shortfall that because of the uncertainities in the demand and supply

So according to the given situation here the additional inventory that beyond the expected demand is known as the safety stock

So the same is relevant

5 0
2 years ago
Someone please help i have to turn this in tonight.
svp [43]

Answer:blending of the mix ingredients.

pasteurization.

homogenization.

aging the mix.

freezing.

packaging.

hardening.

8 0
3 years ago
Other questions:
  • Beta Company expects to incur overhead costs of $20,000 per month and direct production costs of $125 per unit. The estimated pr
    7·1 answer
  • The fact that there is a criminal investigation pending against Johnson and Johnson suggests that regulators feel that the compa
    8·1 answer
  • Frito lay experienced a​ 20% drop in its sales. even though the demand for its product​ decreased, frito lay did not cut the wag
    13·1 answer
  • Assume a firm increases its revenue by $100 while increasing its cost of goods sold by $85. How much additional tax will the fir
    12·2 answers
  • Activity-based costing systems:
    10·1 answer
  • A customer finds a bone in a boneless chicken
    10·1 answer
  • Explain consumptions of the principal of absolute advantage​
    14·1 answer
  • Match the example with the business structure that makes sense for it. To match the items, click the example, and then click the
    15·1 answer
  • A proper greeting is essential to which part of the sales process?
    11·1 answer
  • _________ _________ is often solved with the broker representing both sides designating a separate agent for both buyer and sell
    13·1 answer
Add answer
Login
Not registered? Fast signup
Signup
Login Signup
Ask question!