# Answered Essay: Your friend Harold is trying to decide whether to buy or lease his next a new vehicle will cost \$31,500, and Harold ex will be \$12,500. Alternatively, Harold could lease the same vehicle for five years at a cost of \$4,095 per year, including maintenance. Assume a discount rate of 11 percent his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives Purchasing pects to spend about S 1,000 per year n mantenance costs. He would keep te eie tor ive years snd nina es ha Required: 1. Calculate the net present value of Harold's options. (Future Value of \$1. Present Value of \$1. Future Valve Annuity of \$ 1, Present Veue Annuity.of \$1.) (Use appropriate factorís) Purchase Option Lease Option

Your friend Harold is trying to decide whether to buy or lease his next a new vehicle will cost \$31,500, and Harold ex will be \$12,500. Alternatively, Harold could lease the same vehicle for five years at a cost of \$4,095 per year, including maintenance. Assume a discount rate of 11 percent his next vehicle. He has gathered information about each option but is not sure how to compare the alternatives Purchasing pects to spend about S 1,000 per year n mantenance costs. He would keep te eie tor ive years snd nina es ha Required: 1. Calculate the net present value of Harold’s options. (Future Value of \$1. Present Value of \$1. Future Valve Annuity of \$ 1, Present Veue Annuity.of \$1.) (Use appropriate factorís) Purchase Option Lease Option

Evaluation of purchase option

Cost of new vehicle = \$ 31,500

Annual maintenance cost = \$ 1,000

Useful life of vehicle = 5 years

Scrap value of vehicle after 5 years = \$12,500

Present value of cash outflows = 31,500 + 1,000 (PVAF 11 % , 5 ) – 12,500 (PVF 11 %, 5 )

= 31,500 + 1,000 x 3.696 – 12,500 x 0.593

= 31,500 + 3696 – 7,412.5

= \$ 27,784

Evaluation of lease option

Annual lease = \$4,095

Lease tenure = 5 years

Present value of cash outflows = 4,095 + 4,095 x (PVAF 11 % , 4 )

= 4,095 + 4,095 x 3.102

= 4,095 + 12,702.69

= \$ 16,798

NPV

Purchase option – \$ 27,784

Lease option – \$ 16,798

Since the present value of cash outflows is lower in case of lease option, hence it is economical to acquire new vehicles on lease.

Pages (550 words)
Approximate price: -

Help Me Write My Essay - Reasons:

Best Online Essay Writing Service

We strive to give our customers the best online essay writing experience. We Make sure essays are submitted on time and all the instructions are followed.

Our Writers are Experienced and Professional

Our essay writing service is founded on professional writers who are on stand by to help you any time.

Free Revision Fo all Essays

Sometimes you may require our writers to add on a point to make your essay as customised as possible, we will give you unlimited times to do this. And we will do it for free.

Timely Essay(s)

We understand the frustrations that comes with late essays and our writers are extra careful to not violate this term. Our support team is always engauging our writers to help you have your essay ahead of time.

Customised Essays &100% Confidential

Our Online writing Service has zero torelance for plagiarised papers. We have plagiarism checking tool that generate plagiarism reports just to make sure you are satisfied.

Try it now!

## Calculate the price of your order

Total price:
\$0.00

How it works?

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

HOW OUR ONLINE ESSAY WRITING SERVICE WORKS

Let us write that nagging essay.

By clicking on the "PLACE ORDER" button, tell us your requires. Be precise for an accurate customised essay. You may also upload any reading materials where applicable.

Pick A & Writer

Our ordering form will provide you with a list of writers and their feedbacks. At step 2, its time select a writer. Our online agents are on stand by to help you just in case.

Editing (OUR PART)

At this stage, our editor will go through your essay and make sure your writer did meet all the instructions.