1. *IN EXCEL ONLY* Parts 1-5: use the following information: You have the option to lease or purchase an asset which will have a 3 year life. You can purchase the asset for $17500, or you can lease It for three years with the first payment of $6500 due today (the cash flow stream will be three equal payments at the beginning of periods 1, 2, and 3). You can borrow from the bank at 18%. On the tab labeled Part 3, IN EXCEL ONLY create a spreadsheet model to compare your lease vs. purchase decision. The model should follow best practices (separate your variables from the model or tables you're building), and it should map out the cash flows for each period under each scenario.

   Part 1: What is the NPV of the costs of the lease? (Round to the nearest dollar.)"

   a. 18542

   b. 16677

   . -17060.571

   d. 16594

   Part 2: Use an if function to determine your lease vs purchase decision based on the NPV of the lease-minus-purchase decision. Select its output here (note, you must also have a properly functioning IF function producing this output in your submitted spreadsheet to receive full credit).

   a. Lease

   b. Purchase

   Part 3: Create an additional column that contains the "'Lease Minus Purchase" cash flows, and calculate the IRR of the differential cash flows. (Round to the nearest 2 decimal places, ex: xxxx%)"

   a. -0.14875

   b. 0.061

   c.0.18

   d. 0.119

   Part 4: You discover that the asset will have a salvage value at the end of Year 3 of $1000. What is the new NPV of the costs of the purchase?

   a. 17476

   b. 16677

   . 16653

   d. -16677

   Part 5: Determine the purchase price at which you would be indifferent between the lease or the purchase decision (given the new salvage value). Note that again you know, in your heart, that Solver would be a great way to approach this problem, but alas, you are constrained. Using your completed model, substitute the following numbers in to approximate what Solver is doing. Round to the nearest dollar. "

   . 17524

   b. 23177

   . 17675

   d. 17476