Chapter 6 lecture

Xls worksheet page 143 145 worksheet 13 lease vs bank

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Unformatted text preview: s Last scheduled pmt – return of security deposit + end-lease residual payment end-lease 12 Auto leasing - Example • • • Reference (Examples): Reference File: Pfe_chap06.xls Worksheet: “page 143-145” Worksheet: 13 Lease vs. Bank Loan – Using the example in the text (p. 145): • Consider the same Auto leasing example. • Assume that you want to purchase the car and will Assume make $1,315 down-payments. Bank interest rate is 3%. 3%. • What will be your monthly payments? • Why is it higher than the lease payments (even though Why the interest rate is 3%; less than the EAIR?) the • Are we missing anything? • • • Reference (Examples): Reference File: Pfe_chap06.xls Worksheet: “page 143-145” Worksheet: 14 Lease vs. Bank Loan – Using the example in the text (p. 145): • Consider the same Auto leasing example: 15 Lease vs. Bank Loan – The catch: • After 24 months, we have the car (worth After $15,000 according to our estimate) if we take the bank loan the • So, for the purchase price of $22,905, we get So, the car for two years and the PV of the residual value value • • • Reference (Examples): Reference File: Pfe_chap06.xls Worksheet: “page 146” and “page 146, bottom” Worksheet: 16 Lease vs. Bank Loan 17 Compounding period < year – Compounding period frequency affects the PV or Compounding the FV we calculate the • Effective annual interest is different from the IRR when Effective compounding period < year compounding • 2 ways...
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