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3. Automobile dealers are increasingly advertising the leasing of vehicles in lieu of purchasing. In one case, a $20,000 automobile can be leased for $375 per month for 36 months, after which it is returned to the dealer. If the automobile is purchased, it could be financed for 3 years at a 10 percent annual rate with a down payment of 5 percent and 36 equal monthly payments. If at the end of the 36-month period the vehicle is estimated to be worth $8,000, which would be the preferred alternative? Assume that the time value of money to the buyer is also 10 percent per annum. Answer - it is cheaper to lease. The present value of the lease is $11,628, and the present value of the purchase is $14,065. 3. Automobile dealers are increasingly advertising the leasing of vehicles in lieu of purchasing. In one case, a $20,000 automobile can be leased for $375 per month for 36 months, after which it is returned to the dealer. If the automobile is purchased, it could be financed for 3 years at a 10 percent annual rate with a down payment of 5 percent and 36 equal monthly payments. If at the end of the 36-month period the vehicle is estimated to be worth $8,000, which would be the preferred alternative? Assume that the time value of money to the buyer is also 10 percent per annum. Answer - it is cheaper to lease. The present value of the lease is $11,628, and the present value of the purchase is $14,065