1) You are interested in acquiring a luxury car. The dealer has offered you the following alternatives.
Purchase Alternative: Purchase for $55,000 inclusive sales tax, title fees, etc. The resale value of the vehicle at the end of 48 months is expected to be is $31,000 minus $0.40 times the miles driven in excess of 40,000 miles. If you drive less than 40,000 miles over the 48 month period, the resale value will not change.
Lease Alternative: Initial down payment including "bank fee' is $7,000. Lease term = 48 months. Monthly lease payment (payable end of month) is $749.00. Miles allowed is 40,000 over the 48 month period. Payment at lease termination is $3,500 to prepare the vehicle for sale to a different customer. Charge for excess mileage is $0.69/mile inclusive of taxes.
a) Present the results in a tabular form with following columns a) miles Driven (in increments of 5000 miles) over the 4 year period and PV in $.
Money is worth 9% per year compounded monthly (this is 0.75% per month)