MateringGeology Master- AR Problem 13-25 Net Present Value Analysis of a Lease or Buy Decision [Lo13-2) The Riteway Ad Agency provides cars for its sales staff. In the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company's present fleet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the company is considering two Purchase alternative: The company can purchase the cars, as in the past, and sell the cars after three years of use. Ten cars will be needed, which can be purchased at a discounted price of $26,000 each. If this alternative is accepted, the following costs will be incurred on the fieet as a whole: Annual cost of servicing, taxes, and licensing S Repairs, first year 2.100 4,600 Repairs, second year 6.600 Repairs, third year At the end of three years, the fleet could be sold for one-half of the original purchase price. Lease alternative: The company can lease the cars under a three-year lease contract. The lease cost per year payment due of 1) As part of this lease be required to would provide all servicing and repairs, license the cars, and pay all the taxes. y would make a $10.500 deposit at the the period, which would be refunded when the cars were returned to the at the end of the lease contract. Riteway Ad Agency's required rate of return is 20%. Click here to view Exhibit 13B-1 and Exhibit 13B-2. to determine the appropriate discount factor(s) using Required the cash flows associated with each 1. Use the total cost approach to determine the present value of I os