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Joshua can purchase a new car for $35,000. Alternatively, in addition to a down payment of $1,400, Joshua can make lease payments of $550 at
Joshua can purchase a new car for $35,000. Alternatively, in addition to a down payment of $1,400, Joshua can make lease payments of $550 at the beginning of each month for three years to lease the car. The car has a residual value of $17,500. Assume that the cost of borrowing is 4.31% compounded monthly.
a. Which option is economically better for Joshua?
Buy Now
Lease
b. In the lease option, what will be the buyback value of the vehicle at the end of two years?
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