4. With a somber face, Adam Rust looked at the equally somber face of his mechanic and sighed. The mechanic had just pronounced a death sentence on his road-weary car. The car had served him well - at a cost of $500 it had lasted through four years of college with minimal repairs. Now, he desperately needed wheels. He had just graduated, and had a good job at a decent starting salary. He had been salivating at the prospect of being able to afford a new car - his first new car ever. The car dealer seemed to be very optimistic about his ability to afford the car payments - car payments would be a first for him top. Adam was looking at a price of $35,000 for his dream car. The dealer had given him three payment options: 1. Zero percent financing. He would make $4.000 down payment and finance the remainder with a 0% APR four-year loan with monthly payments. He hrad the down payment, thanks to generous graduation gifts from friends and family. 2. No money down. He would get a $4,000 rebate from the maker, which he would use for the down payment, and finance the rest with a standard 48-month loan, with an 8% APR. This was attractive. Paying the $4,000 if he chose Option 1 (the 0% financing option) would wipe out his savings, and he could think of many other uses for the $4.000 if he didn't have to use it as a down payment for a car. 3. Pay cash. Get the $4.000 rebate and pay the remaining $31.000 with cash. While Adam didn't have $31,000, he wanted to look at this option and compare it to the rest. His parents always paid cash when they bought their family car; Adam wondered if this really was a good idea. What are the cash flows associated with each of Adam's three car financing options? (draw a timeline for each) b. Adam had his $4.000 in an investment account earning 5%, with monthly compounding. What was the best option? What if Adam had the full purchase price for the car in savings? Then what would the best option be? a N=12.4 ;=9.4 FvcY1605.08 c. pay cash