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3. After performing an inventory of police cars, the police chief has come to the conclusion that five of its cars are not currently needed.
3. After performing an inventory of police cars, the police chief has come to the conclusion that five of its cars are not currently needed. However, they will be needed in 3 years after the police force does some additional training and hiring. You are considering leasing the vehicles to the City of Indianapolis in the interim. The cars have a total current market value of $180,000, but will depreciate in value by $60,000 over the three-year period. The appropriate discount rate is 5%. a. What is the minimum fixed yearly lease payment you would recommend the city charge (assume that the lease would begin at the end of year 0, with payments received at the end of years 1, 2, and 3)? b. How much of the lease payment goes to pay for depreciation, and how much for rate-of-return opportunity cost
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