National Motors Company advertised three alternatives for a 25-month lease on a new Tahoe: 

(1) Zero dollars down and a lease payment of $1,750 per month for 25 months, 

(2) $5,000 down and $1,500 per month for 25 months, or 

(3) $38,500 down and no payments for 25 months.

Use the present value Table B.3 in Appendix B to determine the current present value for each of the three options (assume you have enough cash to accept any alternative and the annual interest rate is 12% compounded monthly). Then, identify the best option for the customer.

Table B.3

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TABLE B.3 Excerpt Present Value of an Annuity of 1 Periods 4.7500% 4.9851% 5.000% 1 0.9547 0.9525 0.9524 2 1.8660 1.8598 1.8594 3 2.7361 2.7240 2.7232 4 3.5666 3.5467 3.5460 5 4.3596 4.3313 4.3295 6 5.1165 5.0781 5.0757 Rate 5.0155% 0.9522 1.8590 2.7225 3.5449 4.3276 5.0732