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Amy was offered two options for a car she was purchasing: Lease option: Pay lease amounts...

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Finance

Amy was offered two options for a car she was purchasing:

  • Lease option: Pay lease amounts of $400 at thebeginning of every month for 6 years. At the the end of 6 years,purchase the car for $13,500.
  • Buy option: Purchase the car immediately for$25,000.

The money is worth 7.40% compounded monthly.

a. What is the Discounted Cash Flow (DCF) forthe lease option?

Answer & Explanation Solved by verified expert
4.2 Ratings (800 Votes)
Discounted cash flow of the Lease option Present value of monthly lease payments Present value of Cash paid to purchase the car at the end of 6th year Calculation of Present value of monthly lease payments As the lease payments are at the    See Answer
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Transcribed Image Text

Amy was offered two options for a car she was purchasing:Lease option: Pay lease amounts of $400 at thebeginning of every month for 6 years. At the the end of 6 years,purchase the car for $13,500.Buy option: Purchase the car immediately for$25,000.The money is worth 7.40% compounded monthly.a. What is the Discounted Cash Flow (DCF) forthe lease option?

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