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Comparing Different Financing Options EXAMPLE 3.9 Buying a Car: Paying in Cash versus Taking a Loan...
We are considering purchasing a car. We can obtain financing (a loan) from the dealer or...
We are considering purchasing a car. We can obtain financing (a loan) from the dealer or the bank. The term of either loan will be 5 years (with monthly payments). The dealer offers a loan with an annual nominal interest rate of 1.9% for the full cost of $24, 000 (including taxes, etc) or we may purchase the car at the discounted price of $21, 500 and finance through the bank at an interest rate of 4.5%. Which option should...
How much car can I afford? Before buying a car, it is critical that you determine...
How much car can I afford? Before buying a car, it is critical that you determine both the complete price of the vehicle and what you can afford to spend. This information is essential in deciding whether to pay cash or finance the vehicle with a loan. The difference between these two methods of payment, however, is the difference between paying the car's full price versus making a much smaller down payment and fitting the monthly payments into your budget....
Case Questions 1. What are the cash flows associated with each of Adam's three car financing options?
Case Questions 1. What are the cash flows associated with each of Adam's three car financing options? 2. Suppose that, similar to his parents, Adam had plenty of cash in the bank so that he could easily afford to pay cash for the car without running into debt now or in the foreseeable future. If his cash earns interest at a 5.4% APR (based on monthly compounding) at the bank, what would be his best purchase option for the car? 3. In fact,...
СKG Auto compact car manufacturing assembly plants rely on parts from multiple outside vendors and internal...
СKG Auto compact car manufacturing assembly plants rely on parts from multiple outside vendors and internal subassembly plants. Currently, these parts are all transported via independent trucking firms for negotiated fees based on actual tons shipped and miles. The operations management group has been dissatisfied lately with the service levels provided by these outside trucking companies, as well as with the rising costs of roughly 6.0% per year for the last two years. These costs are expected to rise in...
How much car can I afford? Before buying a car, it is critical that you determine both the complete price of the vehicle and what you can afford to spend. This information is essential in deciding whether to pay cash or finance the vehicle with a loan. The difference between these two methods of payment, however, is the difference between paying the car's full price versus making a much smaller down payment and fitting the monthly payments into your budget....
Case Questions 1. What are the cash flows associated with each of Adam's three car financing options? 2. Suppose that, similar to his parents, Adam had plenty of cash in the bank so that he could easily afford to pay cash for the car without running into debt now or in the foreseeable future. If his cash earns interest at a 5.4% APR (based on monthly compounding) at the bank, what would be his best purchase option for the car? 3. In fact,...
СKG Auto compact car manufacturing assembly plants rely on parts from multiple outside vendors and internal subassembly plants. Currently, these parts are all transported via independent trucking firms for negotiated fees based on actual tons shipped and miles. The operations management group has been dissatisfied lately with the service levels provided by these outside trucking companies, as well as with the rising costs of roughly 6.0% per year for the last two years. These costs are expected to rise in...
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