Homework Answers
a). PV of Lease Payment = Lease Payment * [{1 - (1 + r)-n} / r]
= $7,100 * [{1 - (1 + 0.08)-7} / 0.08]
= $7,100 * [0.4165 / 0.08]
= $7,100 * 5.2064 = $36,965.23
b). It is cheaper to lease as the PV of lease payments is less than the buying cost of the truck.
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thanks.
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