4.Proctor & Gamble plans to obtain production equipment for a lease price of $85,000 and requires a down payment of $15,000. What is the residual value after one year if interest charged is 9.99% compounded monthly and monthly payments are $5,609.67? (Ans: $6,250.03)

5.Anderson is the production manager at Voortman Cookies. He is considering leasing a new high efficiency oven that will improve productivity. The terms of the 10-year lease require quarterly payments of $35,125 including interest at 6.99% compounded monthly.

a.If the equipment is valued at $1,315,557.95 today, what is the estimated residual value of the equipment when the lease expires? (Ans: $592,137.21)

b.If 4-year financing at 7.12% compounded quarterly is required to pay off the residual value of the lease, what end-of quarter payments must be made? (Ans: $42,854.63)

6.A luxury vehicle can be purchased for $39,779.99 or leased for monthly payments of $485.50 for 5 years, with a down payment of $5,000 and a buy-back (residual value) of $12,450. If interest is 3.9% compounded annually, which is option is preferred? What is the economic advantage of the preferred choice? (purchase; E.A.= $2,057.92)