John got a job at a law firm and Within a year, he had saved $5000 and decided to buy a new car but was not quite sure if he should lease it or buy it through financing from the bank. Assume a rate of interest of 5.50% compounded annually for both options.

1.Be sure to include the residual value (with HST, 13 %) at the end of the last payment interval, the net price, and the after-tax payments at equal payment intervals.

1. Which option would be most economical for John? Show all calculations and provided a detailed explanation with your answer.Compare NPVs
2. What should the residual payment be (including taxes) in order to make both options equal?
3. Which option would be most economical if the residual value was $20,000 (including HST) for the lease option? Provide justification for your answer.

Leasing the car
Down payment		$5,000.00
Interest (compounded annually)		5.50%
Term in months		72
Monthly payments (without HST)		$220.00
		(beginning-of-month payments)
Residual (FV) payment to own		$13,800.00
Financing the car
Down payment		$5,000.00
Interest (compounded annually)		5.50%
List Price		$26,500.00
Additional purchase costs		$1,941.00
Term in months		72