I was studying math question, and I have a question that I don't really understand to do.

I must use TVM calculations.

The 15 year old water heater in Alex's home stopped working so he needs a new one. Alex works for minimum wage. After paying his monthly expenses he has $50 disposable income left. He has an unused credit card that charges 19.9% compounded daily. He has two options:

• Alex could lease from his utility company for $19.50 per month. This would include parts and service.
• He could buy a water heater for $852.75 plus an installation fee of $250, using his credit card. He could afford to pay no more than $50 each month.

a) What costs are associated with buying and leasing?

b) What do you recommend for Alex? Be sure you compare buying and leasing over the same time period.

c) Suppose that the life expectancy of a water heater is 10yrs. Would this change your recommendation?

My work,

a)

Buying:

• N 27.74 N 24 N 1

I 19.9 I 19.9 I 19.9

PV 1102.75 PV 1102.75 PV 36.67

PMT -50 PMT -50 * PMT -37.28

FV 0 * FV -36.67 FV 0

P/Y 12 P/Y 12 P/Y 12

C/Y 365 C/Y 365 C/Y 365

(50 x 27) + 37.28 = 1387.28

I calculated up to here.

Is it the correct way to do it?

And I am not sure how to do Leasing part.

Is it this way (Leasing)? 19.5 x 28 = 546

Since N is 27.74, I calculated with 28 in leasing.

I will be appreciate if you can give me answer of each of the questions (a, b, and c).