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Exercise 10-22C Analyzing lease purchase options LO C3 General Motors advertised three alternatives for a 15-month lease on a new Tahoe: (1) zero dollars down and a lease payment of $2,000 per month for 15 months, (2) $6,600 down and $1,750 per month for 15 months, or (3) $41,500 down and no payments for 15 months. (Table B.1, Table B.2, Table B.3, and Table 8.4) (Use appropriate factor(s) from the tables provided.) Calculate the total present value of lease payments under the three alternatives (assume the annual interest rate is 12% compounded monthly). n Table Value Amount Present Value 1.0000 $ 0 $ 0 0 Option 1 Down Payment Monthly Payments Total Present Value Option 2 Down Payment Monthly Payments Total Present Value Table Value Amount Present Value 1.0000 Option 3 Table Value Amount Present Value 1.0000 Down Payment Total Present Value TABLE B.1 p=1/(1+i) Present Value of 1 Rate 8% 10% 9% 12% 15% 7% Periods 1% 2% 5% 3% 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 25 30 35 40 0.9901 0.9803 0.9706 0.9610 0.9515 0.9420 0.9327 0.9235 0.9143 0.9053 0.8963 0.8874 0.8787 0.8700 0.8613 0.8528 0.8444 0.8360 0.8277 0.8195 0.7798 0.7419 0.7059 0.6717 0.9804 0.9612 0.9423 0.9238 0.9057 0.8880 0.8706 0.8535 0.8368 0.8203 0.8043 0.7885 0.7730 0.7579 0.7430 0.7284 0.7142 0.7002 0.6854 0.6730 0.6095 0.5521 0.5000 0.4529 0.9709 0.9426 0.9151 0.8885 0.8626 0.8375 0.8131 0.7894 0.7664 0.7441 0.7224 0.7014 0.6810 0.6611 0.5419 0.6232 0.5050 0.5874 0.5703 0.5537 0.4776 0.4120 0.3554 0.3066 0.9615 0.9246 0.8890 0.8548 0.8219 0.7903 0.7599 0.7307 0.7026 0.6756 0.6496 0.6246 0.6006 0.5775 0.5553 0.5339 0.5134 0.4936 0.4746 0.4564 0.3751 0.3083 0.2534 0.2083 0.9524 0.9070 0.8638 0.8227 0.7835 0.7462 0.7107 0.6768 0.6446 0.6139 0.5847 0.5568 0.5303 0.5051 0.4810 0.4581 0.4363 0.4155 0.3957 0.3769 0.2953 0.2314 0.1813 0.1420 0.9434 0.8900 0.8396 0.7921 0.7473 0.7050 0.6651 0.6274 0.5919 0.5584 0.5268 0.4970 0.4688 0.4423 0.4173 0.3936 0.3714 0.3503 0.3305 0.3118 0.2330 0.1741 0.1301 0.0972 0.9346 0.8734 0.8163 0.7629 0.7130 0.6663 0.6227 0.5820 0.5439 0.5083 0.4751 0.4440 0.4150 0.3878 0.3624 0.3387 0.3166 0.2959 0.2765 0.2584 0.1842 0.1314 0.0937 0.0668 0.9259 0.8573 0.7938 0.7350 0.6806 0.6302 0.5835 0.5403 0.5002 0.4632 0.4289 0.3971 0.3677 0.3405 0.3152 0.2919 0.2703 0.2502 0.2317 0.2145 0.1460 0.0994 0.0676 0.0460 0.9174 0.8417 0.7722 0.7084 0.6499 0.5963 0.5470 0.5019 0.4604 0.4224 0.3875 0.3555 0.3262 0.2992 0.2745 0.2519 0.2311 0.2120 0.1945 0.1784 0.1160 0.0754 0.0490 0.0318 0.9091 0.8264 0.7513 0.6830 0.6209 0.5645 0.5132 0.4665 0.4241 0.3855 0.3505 0.3186 0.2897 0.2633 0.2394 0.2176 0.1978 0.1799 0.1635 0.1486 0.0923 0.0573 0.0356 0.0221 0.8929 0.7972 0.7118 0.6355 0.5674 0.5066 0.4523 0.4039 0.3606 0.3220 0.2875 0.2567 0.2292 0.2046 0.1827 0.1631 0.1456 0.1300 0.1161 0.1037 0.0588 0.0334 0.0189 0.0107 0.8696 0.7561 0.6575 0.5718 0.4972 0.4323 0.3759 0.3269 0.2843 0.2472 0.2149 0.1869 0.1625 0.1413 0.1229 0.1069 0.0929 0.0808 0.0703 0.0611 0.0304 0.0151 0.0075 0.0037 Used to compute the present value of a known future amount. For example: How much would you need to invest today at 10% compounded semiannually to accumulate $5.000 in 6 years from today? Using the factors of n = 12 and i = 5% (12 semiannual periods and a semiannual rate of 5%) the factor is 0.5568. You would need to invest 52,784 today (55.000X0.5568)

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