ZuoTi.Pro
Question

Your landscaping company can lease a truck for $7,700 a year (paid at year-end) for 7 years. It can instead buy the truck for

business   finance   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Information provided:

Future value= $1,600,000

Monthly withdrawal= $25,000

Interest rate= 5.5%/12= 0.4583% per month

The number of months till the trust fund will last the client is calculated by entering the below in a financial calculator:

FV= 1,600,000

PMT= 25,000

I/Y= 0.4583

Press the CPT key and N to compute the number of months till the trust fund will last the client.

The value obtained is 56.2499

Therefore, the trust fund will last the client 56.25 months.

In case of any query, kindly comment on the solution.

a.Information provided:

Yearly payment= $7,700

Time= 7 years

Interest rate= 8%

The present value of the lease is calculated by entering the below in a financial calculator:

PMT= 7,700

N= 7

I/Y= 8

Press the CPT key and PV to compute the present value of the lease.

The value obtained is 40,089.05.

Therefore, the present value of the lease is $40,089.05.

b.It is cheaper to lease as it will cost $41,000 to buy the truck whereas, it will cost $40,089.05 to lease.

c. Annuity due refers to annuity that occurs at the beginning of a period.

This can also be solved using a financial calculator by inputting the below into the calculator:

The financial calculator is set in the end mode. Annuity due is calculated by setting the calculator to the beginning mode (BGN). To do this, press 2nd BGN 2nd SET on the Texas BA II Plus calculator.

The present value of annuity due is calculated by entering the below in a financial calculator:

PMT= 7,700

N= 7

I/Y= 8

Press the CPT key and PV in a financial calculator in BGN mode to compute the present value of annuity due.

The value obtained is 43,296.17.

Therefore, the present value of annuity due is $43,296.17.

In case of any query, kindly comment on the solution.

0 2
Add a comment
Know the answer?
Add Answer to:
Your landscaping company can lease a truck for $7,700 a year (paid at year-end) for 7...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • Your landscaping company can lease a truck for $8,100 a year (paid at year-end) for 7...

    Your landscaping company can lease a truck for $8,100 a year (paid at year-end) for 7 years. It can instead buy the truck for $43,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%. a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Is it cheaper to buy or lease? c. What is the...

  • Your landscaping company can lease a truck for $7,000 a year (paid at year-end) for 5...

    Your landscaping company can lease a truck for $7,000 a year (paid at year-end) for 5 years. It can instead buy the truck for $30,000. The truck will be valueless after 5 years. The interest rate your company can earn on its funds is 6%. a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Is it cheaper to buy or lease? c. What is the...

  • Your landscaping company can lease a truck for $7,700 a year for 7 years. It can...

    Your landscaping company can lease a truck for $7,700 a year for 7 years. It can instead buy the truck for $40,000. The truck will be valueless after 7 years. a.What is the present value of the lease payments, if the opportunity cost of capital is 8%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)Present value $ b. Is it cheaper to buy or lease?BuyLease

  • Computational Your landscaping company can lease a truck for $7,100 a year for 7 years. It...

    Computational Your landscaping company can lease a truck for $7,100 a year for 7 years. It can Instead buy the truck for $38,000. The truck will be valueless after 7 years. a. What is the present value of the lease payments, if the opportunity cost of capital is 8%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value b. Is it cheaper to buy or lease? Lease Buy

  • Your landscaping company can lease a truck for $7,000 a year for 5 years. It can...

    Your landscaping company can lease a truck for $7,000 a year for 5 years. It can instead buy the truck for $30,000. The truck will be valueless after 5 years. a. What is the present value of the lease payments, if the opportunity cost of capital is 6%. (Do not round intermediate calculations. Round your answer to 2 decimal places.)   Present value $    b. Is it cheaper to buy or lease? Lease Buy

  • please answer all question with details for full review ! thanks. Problem 5-34 Annuity Due (L03)...

    please answer all question with details for full review ! thanks. Problem 5-34 Annuity Due (L03) Your landscaping company can lease a truck for $8,800 a year (paid at year-end) for 5 years. It can instead buy the truck for $38.000 The truck will be valueless after 5 years. The interest rate your company can earn on its funds is 6%. a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer...

  • Problem 27-01 Lease or Buy [LO3] You work for a nuclear research laboratory that is contemplating...

    Problem 27-01 Lease or Buy [LO3] You work for a nuclear research laboratory that is contemplating leasing a diagnostic scanner (leasing is a very common practice with expensive, high-tech equipment). The scanner costs $5,200,000, and it would be depreciated straight-line to zero over five years. Because of radiation contamination, it actually will be completely valueless in five years. You can lease it for $1,220,000 per year for five years. Assume that the tax rate is 22 percent. You can borrow...

  • Your firm needs to invest in a new delivery truck. The life expectancy of the delivery...

    Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4,000 (paid at the beginning of each month). Your firm can borrow at 7% APR with quarterly compounding. a. Calculate the effective annual rate on your firm's borrowings. b....

  • Problem 4-60 Calculating Annuity Values After deciding to get a new car, you can either lease...

    Problem 4-60 Calculating Annuity Values After deciding to get a new car, you can either lease the car or purchase it with a two-year loan. The car you wish to buy costs $36,500. The dealer has a special leasing arrangement where you pay $102 today and $502 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 6 percent, compounded monthly....

  • After deciding to acquire a new car, you can either lease the car or purchase it...

    After deciding to acquire a new car, you can either lease the car or purchase it with a four-year loan. The car you want costs $37,000. The dealer has a leasing arrangement where you pay $103 today and $503 per month for the next four years. If you purchase the car, you will pay it off in monthly payments over the next four years at an APR of 7 percent. You believe that you will be able to sell the...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT