After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $43,000. The dealer has a special leasing arrangement where you pay $4,300 today and $505 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at an APR of 6 percent. You believe you will be able to sell the car for $28,000 in three years. a. What is the present value of leasing the car

The correct answer is $20,899.86.

Explanation:

According to the scenario, computation of the given data are as follows:

Rate  = 6%

Rate monthly = 6%/12

Cost = $43,000

Down payment = $4,300

Payment Per month (pmt) = $505

Time period = 36 months

So, we can calculate the present value of leasing by using financial calculator:

The attachment is attached below:

Present value = PV + Down payment

So, Present value of leasing = $16,599.86 + $4,300

= $20,899.86

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