Question

Problem 6-58 Calculating Annuity Values [LO After deciding to buy a new car, you can either lease the car or purchase it on a two-year loan. The car you wish to buy costs $39,000 The dealer has a special leasing arrangement where you pay $107 today and $507 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 5 percent. You believe you will be able to sell the car for $27,000 in two years What break-even resale price in two years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Break-even sale price s illllllllllllNT 1 What is the present value of purchasing the car? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.) Present value

Answer 1

Question 1)

To find the break even price between leasing and purchasing, we need to calculate the resale value after purchasing the car.