1 Problem 14-25 (Algo) Net Present Value Analysis of a Lease or Buy Decision (L014-2) The towny Ad Agency provides cars for its sales start in the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company's present feet of cars ishree years old and will be sold very shortly to provide replacement feet, the company is considering two alternatives 25 - Ne alternativet Hempany can see the the Her three years of care and, which can be purchased add row or 326, the alternative to opted the following conte vill be red on tte feet as a whole hal Anna con viin, taxes, and licensing Repair the year Hepat, sed year 6.900 2.000 35.300 # 7.500 At the end of three years, the fleet could be sold for one half of the original purchase price Lease alternative: They can see the sonder the leave contract the lowed he $60.000 per year the first payment due at the of Year 1). As part of the leare the one we provide all servicing and repair, Tiene the CREN. Ad pay all the A Riway be reired to $14,000 worty depot the beginning of the lone period, which would be red when the cars were returned to the at the end of the lesson Rteway Ad Agency's required rate of retum is 18% Click here to view Ex 140:1 and Ext 148.2. to determine the appropriate ascount factor) using tables Required: 1. What is the net present value of the cash flows associated with the purchase alterative? 2. What is the net present value of the cash flows associated with the lease alternative? 3. Which alternate should the company accept? Complete this question by entering your answers in the tabs below Recured 1 Required Requred What is the not present value of the cash flows associated with the purchase aterrative? (Enter negative amount insign Round your answer to the nearest wholar amount 1 Annual cost of revicing, taxes, and licensing spate, first year Tapies, second yeat opis, third year 84,900 02.00 $3,300 $1,300 25 Police At the end of three years, the feet could be sold for one-half of the original purchase price Lease alternatives the corpany can lean the cate under a three-year leane contract. The cost would be 60.000 per year the test payment dos at the end of Year 1). As part of this lease cost, the owner would provide servierepairs, teense the cars and pay all the taxe. Revay would be required to make a $10,000 security deposit at the beginning of the leren period, which would be refunded when the cars were returned to the owner at the end of the lo contract. Rewny Ad Agency's required rate of return is 18% Click here to view Exhibit 481 and Exh|1.1992, to determine the appropriate discount factors, using tables Required: 1. What is the net present value of the cash flows associated with the purchase alternative? 2. What is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required) What is the net present value of the cash flows associated with Uwe purchase alternative? (Enter negative amount with a won. Round your moal antwer to the nearest while dollar amount. Nel peet value Required 2 > 1 Al cost of servleiny, taxes, and licensing Repair, tirst year Hopars, Adyear Repairs, third year $4.900 $ 2,600 $5,300 $ 7,300 25 points Patron At the end of three years, the fleet could be sold for one half of the original purchase price Lease alternativer The company can lease the cars under a three-year lease contract. The loan coet would be 61.000 per year the first payment due at the end of Year 1). A part of this les con the owner would provide all servicing and repairs, license the Cars And pay all the text iceway would be wired to make a $14,010 security deposit at the beginning of the lease period which would be refunded when the cars were returned to the at the end of the lease contract Reway Ad Agency's required rate of retum is 18% Click here to view Exhibit 148.1 and Exhibit 148-2. to determine the appropriate discount factors) uning tables Required: 1. What is the not present value of the cash flows associated with the purchase alternative? 2. What is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? Complete this question by entering your answers in the tabs below. Recured Requirt 2 Required What is the net resest value of the cash flows associated with the lease alternative (Enter negative amount with a minus sign Round your foot answer to the nearest whole dollar amount) Required 1 Required 3 > 1 Angat cost of servicing, taxes, and conting Repairs, first year Repairs, second year Sepairs, third year $ 4,900 $ 2,800 $ 5,300 87,300 25 points Preferences At the end of three years, the fleet could be sold for one-half of the original purchase price. Lease alternative: The company can lenne the carn under three-year lenne contract. The Lease cost vould be $68,000 per year (the first paynent due at the end of Year 1). Na part of this lone cost the owner would provide all servicing and repairs, license the care and pay all the taxes. Receway would be required to make $24,000 security deposit at the beginning of the lease period, which would be refunded when the cars were returned to the ow at the end of the lease contact. Riteway Ad Agenty's required rate of return is t8% Click here to view Exhibit 148-1 and Exhibit 148 2. to determine the appropriate discount factor(s) using tables Required: 1 What is the net present value of the cash flows associated with the purchase alternative? 2. What is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? Complete this question by entering your answers in the tabs below. Required: Required 2 Regullosa Which alternative should the company accept? Purchase animative La tomative