A) What is the NPV of leasing the car for three years? (HINT: Answer will be a NEGATIVE number)

B) What is the NPV of purchasing the car and selling after three years? (HINT: The answer will be a negative number...)

C) At what discount rate would the graduate be indifferent between the two choices?

A young graduate is trying to decide whether to lease or buy a car for the next three years. The cash flows for each choice are shown below. (We will ignore gas, insurance, and tag fees.) YEAR 0 1 2 -$4,343.00 -$3,500.00 -$3,500.00 -$3,500.00 LEASE -$35,289.00 $22,075.00 PURCHASE 0 The graduate has a personal discount rate of 6.00%