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Sagot :
Answer:
Joan should buy the car instead of leasing it.
Explanation:
Residual value of the car at year3 is $14,000
The sales tax of the car is 6% * $20,000 = $1200
Annual payment of the money borrowed for car:
PV = $20,000, I/Y = 9.7/12, FV = 0, PMT = $642.53
Annual payment : $642.53 * 12 = $7,710
Cost of owning the car:
$1,200 + $7,710 + $7,710 + $7,710 - $14,000 = $10,330
Lease Rentals :
$3,600 + 3,600 + 3,600 = $10,800
The cost of owning a car is lower than rentals so Joan should go with the buying choice.
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