Problem 12-25 (Algo) Net Present Value Analysis of a Lease or Buy Decision (L012-2] The Riteway Ad Agency provides cars for its sales statt. 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 alternatives: 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 $19.000 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 $5,200 Hepales, first year $ 3,100 Hepairs, second year $ 5,50 Hepairs, third year $ 7,600 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 $71,000 per year the first payment doe 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 Reway would be required to make a $15,500 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. Ritewny Ad Agencys required rate of return is 15% Click here to view Ext:120 and Exhibit 28.2. to determine the appropriate discount factory sing tables Required: 1 What is the net present value of the cash flows associated with the purchase alternative? 2. What is the net present value of the cash flows associated with the lease alternative? 3 which alternative should the company accept Complete this question by entering your answers in the tobs below. Required 1 Required 2 Required What is the net present value of the cash flows associated with the purchase alternative Enter negative amount with a mious sign. Round your final answer to the nearest whole dollar amount. Problem 12-25 (Algo) Net Present Value Analysis of a Lease or Buy Decision (L012-2] 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 teet, the company is considering two alternatives 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 $19,000 each of this alternative is accepted the following costs will be incurred on the fleet as a whole Annual cost of servicing, taxes, and liceosing 55,200 Repairs, first year 53,100 Repairs, second year $ 5,600 lepairs, third year $ 7.600 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 571,000 per year (the first payment cue 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. Riteway would be required to make a 515,500 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 Riteway Ad Agency's required rate of return is 15% Click here to view it.28:1 and Exbat 120.2. to determine the appropriate discount factor(n) using tables Required: 1 What is the nel present value of the cash flows associated with the purchase a temative? 2 Wisat is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? complete this question by entering your answers in the tabs below Tequired Requited Required What is the net present value of the cash flows associated with the lease alternative? (Enter negative amount with a minus slon. Round your final answer to the nearest while dollar amount) Net prostitve Problem 12-25 (Algo) Net Present Volue Analysis of a Lease or Buy Decision (L012-2] 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 fieet the company is considering two alternatives 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 $19,000 each. If this alternative is accepted the following costs will be incurred on the fleet as a whole Annual cost of servicing, taxes, and licensing 55,200 Repairs, first year $ 3.100 Repairs, second year 55,600 Repairs, third year $ 7,600 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 571000 per year 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 Riteway would be required to make a $15,500 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 contact Raeway Ad Agency's required rate of retum is 15% Click here to view EXI123.1 and Exhib 128 2. to determine the appropriate discount factors) using tables Required: 1 What is the net present value of the cash flows associated with the purchase alternative? 2 What is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? Complete this question by entering your answers in the tabs below. Required Required Which alternative should the company accept? Purchase allotte Orientative