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please help me as soon as possible. with complet answer. The Wrongway Ad Agency provides cars for its sales staft. In the past, the company
please help me as soon as possible. with complet answer.
The Wrongway Ad Agency provides cars for its sales staft. 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 ofd and vitt fe sold very shortty. To provide a replacement fleet, the company is considering two alternatives as follows: 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 $26,400 each. If this alternatlve is accepted, the following costs will be incurred on the fleet as a whole: 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 would be $84,000 per year (with the first payment due at the end of year 1). As part of this lease cost, the owner would provide all servicing and repairs, license the cars, and pay all the taxes. Wrongway would be required to make a $30,750 security deposit at the beginning of the lease period, which would be refunded when the cars were returned to the owner at the end of the lease contract. Wrongway's required rate of retum is 18%. Circk here to view Exhiblt 10.1 and Exhibit 10.2, to determine the appropriate discount factor(s) using tables. 1. Use the total cost approach to detemine the present value of the cash flows associated with each alternative. (Negutive amounts should be indicated with a minus sign. Round discount factouts) to 3 decinat places. Round other infermedlate cifculations and finat answers to the nearest whole dolfar amounts.) EXHIBIT 10-1 Present Volue of \$1 P=(1+r)nEn EXHIBIT 10-2 Present Value of an Annuity of $1 Pn=r1[1(1+r)n1] Step by Step Solution
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