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P17-6 (similar to) Lease-versus-purchase decision Personal Finance Problem Joanna Browne is considering either leasing or purchasing a new Chrysler Sebring convertible that has a manufacturer's
P17-6 (similar to) Lease-versus-purchase decision Personal Finance Problem Joanna Browne is considering either leasing or purchasing a new Chrysler Sebring convertible that has a manufacturer's suggested retail price (MSRP) of $33,200. The dealership offers a 3-year lease that requires a capital payment of $3,474 ($3,074 down payment + $400 security deposit) and monthly payments of $490. Purchasing requires a $2,610 down payment, sales tax of 6.6% ($2,191), and 36 monthly payments of $911. Joanna estimates the value of the car will be $17,000 at the end of 3 years. She can earn 5.1% annual interest on her savings and is subject to a 6.6% sales tax on purchases. Make a reasonable recommendation to Joanna using a lease-versus-purchase analysis that, for simplicity, ignores the time value of money. a. Calculate the total cost of leasing. b. Calculate the total cost of purchasing. c. Which should Joanna do
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