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Draw a cash flow diagram over 5 years for each financing option below including all of the relevant cash flows. Compare the options by
Draw a cash flow diagram over 5 years for each financing option below including all of the relevant cash flows. Compare the options by determining the equivalent cost in year 0 for each option based on 5 years. Assume the car has a market value of $12,500 after 5 years. Which option costs the least in terms of present value? | Option 1: Option 2: Option 3: You pay $30,000 cash for a brand new car. You put $5,000 down on the car and finance the remaining amount over 5 years at 6% compounded monthly with monthly payments. You lease the car for 5 years making monthly payments of $350. There is an upfront fee of $2,500 and a disposal fee of $500 at the end of your lease.
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