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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

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 3

LEASE -$4,500.00 -$3,500.00 -$3,500.00 -$3,500.00

PURCHASE -$35,141.00 0 0 $24,304.00

The graduate has a personal discount rate of 7.00%. At what discount rate would the graduate be indifferent between the two choices?

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