In Excel

1. You just received a job offer from a big investment bank in Chicago and are thinking of buying a new car. The lease is for 60 months. The financing information is as follows: The cost of purchasing the car is $35,000 Buyers must also pay a destination charge of $525, but lessees have no destination charge. There is a $900 acquisition fee paid by the lessee at the beginning of the lease. There is a $800 security deposit for the lessee at the beginning of the lease. . This fee is refunded at the end of the lease. The lease residual value at the end of 5 years is $18,000. o If the true value is less than this, you must pay the difference. If the true value is greater than this, you do not receive anything. You believe the value of the car will be worth $16,500 at the end of the lease. The monthly lease payments are $450 a month for 60 months. a. What is the monthly IRR and annual IRR of buying versus leasing? [10 points] b. Given a discount rate of 9%, what is the NPV of buying versus leasing? Should you buy or lease? [5 points) C. As your estimated residual value increases from 15,000 to 23,000, how does the IRR and NPV of buying versus leasing change? [5 points] d. Explain why this pattern makes economic sense. [5 points] 1. You just received a job offer from a big investment bank in Chicago and are thinking of buying a new car. The lease is for 60 months. The financing information is as follows: The cost of purchasing the car is $35,000 Buyers must also pay a destination charge of $525, but lessees have no destination charge. There is a $900 acquisition fee paid by the lessee at the beginning of the lease. There is a $800 security deposit for the lessee at the beginning of the lease. . This fee is refunded at the end of the lease. The lease residual value at the end of 5 years is $18,000. o If the true value is less than this, you must pay the difference. If the true value is greater than this, you do not receive anything. You believe the value of the car will be worth $16,500 at the end of the lease. The monthly lease payments are $450 a month for 60 months. a. What is the monthly IRR and annual IRR of buying versus leasing? [10 points] b. Given a discount rate of 9%, what is the NPV of buying versus leasing? Should you buy or lease? [5 points) C. As your estimated residual value increases from 15,000 to 23,000, how does the IRR and NPV of buying versus leasing change? [5 points] d. Explain why this pattern makes economic sense. [5 points]