Adam has just graduated, and has a good job at a decent starting salary. He hopes to purchase his first new car. The car that Adam is considering costs $39,000. The dealer has given him three payment options:

1. Zero percent financing. Make a $2,500 down payment from his savings and finance the remainder with a 0% APR loan for 48 months. Adam has more than enough cash for the down payment, thanks to generous graduation gifts.

2. Rebate with no money down. Receive a $3,400 rebate from the car dealer and finance the rest with a standard 48-month loan, with an 5% APR. He likes this option, as he could think of many other uses for the $2,500 of his saving.

3. Pay cash. Get the $3,400 rebate and pay the rest with cash. While Adam doesnt have $39,000, he wants to evaluate this option. His parents always paid cash when they bought a family car; Adam wonders if this really was a good idea.

1. What are the cash flows associated with each of Adams three car financing options?

Question 1 (12 pts): Down Payment Amount Financed Interest Rate (APR) Loan Term (months) Monthly Payment Option 1- Zero percent financing Option 2 - Rebate w/ $0 down Option 3 - Pay cash MONTHLY CASH FLOWS: Cash flow for Month 0 Cash flow for Month 1 to 48 Option 1- Zero percent financing Option 2 - Rebate w/ $0 down Option 3 - Pay cash Question 1 (12 pts): Down Payment Amount Financed Interest Rate (APR) Loan Term (months) Monthly Payment Option 1- Zero percent financing Option 2 - Rebate w/ $0 down Option 3 - Pay cash MONTHLY CASH FLOWS: Cash flow for Month 0 Cash flow for Month 1 to 48 Option 1- Zero percent financing Option 2 - Rebate w/ $0 down Option 3 - Pay cash