Decision Analysis -- Comparing Automobile Leases

You are interested in leasing a Toyota Corolla. There are three local car dealers that are offering different financial terms for the three-year lease as shown in the following table:

Dealers	Fixed Monthly Cost	Allowable Annual Miles	Cost Per Mile Below Allowable Annual Miles	Cost per Mile Above Allowable Annual Miles
Alissa	$75.00	10,000 miles	$0.45 for the first 10,000 miles	$0.60 for each mile over 10,000
Becky	$150.00	12,500 miles	$0.35 for the first 12,500 miles	$0.50 for each mile over 12,500
Christine	$115.00	15,000 miles	$0.40 for the first 15,000 miles	$0.55 for each mile over 15,000

The leases differ based on the fixed monthly payment and the cost per annual miles. Please note that the cost per annual miles is a disjoint function with one cost for miles below the allowable annual miles and a different cost for miles above the allowable annual miles.

Since you do not know with certainty the number of annual miles that you will travel, you decide to construct a payoff table for your cost of the three-year leases for each of the three dealers for the five estimated number of annual miles given in the table below. Round the calculations for the payoffs to the nearest dollar.

Hint #1: To calculate the values in the payoff table, first calculate your annual cost and then multiply by the years in the lease. Be careful of the different units of time stated in the problem.

Hint #2: In a payoff table, revenues are positive and costs are negative.

Payoff Table

	P(5,000) = 0.15	P(7,500) = 0.20	P(10,000) = 0.30	P(12,500) = 0.20	P(15,000) = 0.15
Dealer	5,000 mi/yr	7,500 mi/yr	10,000 mi/yr	12,500 mi/yr	15,000 mi/yr
Alissa
Becky
Christine