. Peters car is now 8 years old and breaks down quite often. He has three options:

1. Keep paying annual repair costs expected to increase. The car has no salvage value.

2. Buy a similar new car for $35,000 which will last 9 years and $2,000 annually in maintenance. The car will have no salvage value.

3. Lease a similar car on a 3 year lease for $5,000 payment and $400 monthly leasing fees and $1000 in annual maintenance.

a) What is the equivalent annual annuity for buying? $/yr

b) What is the equivalent annual annuity for leasing? $/yr

c) At which point for annual repair costs should Peter consider getting leasing or buying a car as the least cost option? He has a line of credit at 6%.

d) If he decides to scrap his old car what option should he choose buying or leasing?