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F-150 Ford pickup truck for $21,000. He has the cash and if he does not spend it on the truck, it will sit in

his money market account earning 0.1% per month. Ford is offering a lease-with--option-to-buy plan, which requires a $3,000 down payment (up front) and then payments at the END of the next 36 months of $259. At the end of the third year, he has the option to purchase the truck for $10,000.


(a)

Assuming Aldo plans to exercise the purchase option, how do I calculate the present value dollars of buying the truck outright or acquiring it via the lease/buy option?

b


(b) In present value dollars how much better off is he doing the right thing rather than the wrong thing? Be sure to show your work and explain.

Top Answer

(a) PV of the purchase option = $ 21 , 000 PV of... View the full answer

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