After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $39,500. The dealer has a special leasing arrangement where you pay $108 today and $508 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at a 6 percent APR. You believe you will be able to sell the car for $27,500 in three years.

What break-even resale price in three years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Break-even sale price $

What is the present value of purchasing the car? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Present value $

Question

After deciding to buy a new car, you can either lease the car or purchase it on a three-year loan. The car you wish to buy costs $39,500. The dealer has a special leasing arrangement where you pay $108 today and $508 per month for the next three years. If you purchase the car, you will pay it off in monthly payments over the next three years at a 6 percent APR. You believe you will be able to sell the car for $27,500 in three years.

What break-even resale price in three years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Break-even sale price

$

What is the present value of purchasing the car? (Do not round intermediate calculations and round your final answer to 2 decimal places. (e.g., 32.16))

Present value

$