Problem 14-25 (Algo) Net Present Value Analysis of a Lease or Buy Decision (L014-2] The Riteway Ad Agency provides cars for its sales stoff. 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 $18,000 each. If this alternative is accepted, the following costs will be incurred on the fleet as a wholer Annual cost of servicing, taxes, and licensing Repairs, first year Repairs, second year Repairs, third year $ 3,400 $ 1,300 $ 3,800 $ 5,800 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 $53,000 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 $12,000 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 14%. Click here to view Exhibit 148.1 and Exhibit 14B-2. to determine the appropriate discount factor(s) using tables. Click here to view Exhibit 14B-1 and Exhibit 14B-2. to determine the appropriate discount factor(s) 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 1 Required 2 Required 3 What is the net present value of the cash flows associated with the purchase alternative? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Nat present value Required 1 Required 2 > BOHIBIT 548-1 Precent we of the SEZ E 6 OL 0.00 Periods 5 8 95 10% 112 12% 03% 145 15% 16% 17 189 199 204 22 243 25 1 0.962 0.952 090 0935 0925 0.917 0909 0.901 0.893 0.885 0.877 0.870 0.362 0.855 0347 09400833 0826 08200313 0.806 0900 2 0.925 0.907 0.890 0.873 0852 0.342 0.826 0.812 0.797 0.783 0.709 0.756 0743 0.781 079 0705 06940083 067206610650 0.640 0.889 0.864 0.340 0.316 0.794 0720751 0731 0.712 0.69 0.6750658 0641 0.524 0.609 0.593 05790.564 0.551 0537 0.524 0.512 0.55508730792 07830735 07080683 0659 0.636 0613 0.592 0.572 0552 0.534 0516 0.499 0432 0.467 0.451 0437 0423 0.450 5 0.822 0354 0,747 073 0.681 0.650 0.621 0.593 0.567 0543 0.519 0.497 0.4760456 0437 04190.402 0.386 0370 0.355 0.341 0.328 6 07900746 0705 066 0630 0595 0.564 0.535 0.507 0.480 0.456 0432 0.410 0.390 0.370 0352 0.335 0.319 0.303 0.289 02750262 7 0.750 07 0.665 0622 0.5830542 0.50 0.482 452 0.425 0.400 0.376 0354 0333 03140296 0279 0263 0249 0.2350222 0.210 0731 0.677 0.6270582 0.540 0.502 0.467 0.434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 02330 218 0.204 0.191 0179 0.160 0.0005450.592 0544 0500 0.400 0.424 0.391 0.361 0333 0.308 0.284 0263 0.243 0225 0.209 0.194 0190 0167 0.155 0144 0134 0.676 060558 0508 0463 0.422 0.386 0352 0322 0295 0.270 0.247 0.227 0.208 0191 0176 0162 0.149 0137 0126 0116 0.907 050 05050527 0.475 0.429 0.388 0350 0.37 0.207 0.261 0.237 0.2150195 0178 0162 0.145 0135 0123 0112 0.1030096 0.098 0.6250557 0.4970440397 0.356 0.319 0.286 0257 0231 0208 0.187 0.163 0152 0137 0.124 0112 0102 0092 0.0630.078 0.069 0.60105300-409 0.45 0.368 0.326 0.290 0258 0229 0204 0182 0.163 0145 0130 0116 0104 0093 0.034 0.075 0055 0.061 0.055 14 0.57 0.505 04020351 0340 0.299 0.263 0232 0205 0.181 0.350 0.11 0.125 0111 0 099 0088007000690062 0.055 0.049 0044 15 0.5550401 0362 0.315 0.2750239 0209 03 0150 OD 0122 0.108 0.095 0054 001400650057 0.0510045 0.040 0.035 10 0.534 04580394 0309 0292 0.252 0.2180188 0163 0141 0123 0.107 0.093 0001 007100620.054 0.007 0.042003600320028 050 0.06 0.37 0.30 0270 0231 0198 01700146 012501000093 0.0800069 0.060 0,052 0,045 0.00 0.034 0.030 0.026 0023 6494 0.45 0.750 0295 0.250 0.2120180 0.153 0130 0.111 0 095 0.081 0.0690059 0.051 0044 0.03 0.03200280024 0.021 0018 0.75 0.79603010277 0212 0.194 0164 0130 0116 0.098 0.003 0.070 0.000 0.051 0043 0.0370031 0027 0023 0.020 0.017 0.014 20 0456 07 0.312 0258 0215 0.178 0149 0124 0104 0.007 0.073 0.001 0.051 0.003 0.037 0001 0.026 0022 0.019 0.016 0.014 0.012 0090359 0294 0242 0.199 01640135 012 0.093 0.077 0.064 0.053 0.0440037 0.031 0026 0.022 0.00000150013 0011 0.009 22 0.422034202780229 0714 015001 0.083 0.008 0.096 0016 0.030 0032 0.026 0022 0.01 0.015 0.013 0011 0.009 0.007 0205 03250262 0.21 0170 008 0112 0.091 0.074 0.060 0049 0.040 0.033 0.027 0.0220018 0.0150012 0.0100009 0.007 0.006 24 0290 0010 02 0997 0158 0120 0102 0082 0.066 0.053 0043 0.035 0.028 0.0230019 0019 0.013 0010 0.008 0.007 0006 0.005 0.025 0295 0230 0184 OS one 0092 0.014 0059 0047 0.038 0.030 002400200016 0.00 0.00 0.00 0.007 0.006 0.005 0.004 20 0361 021 022002 0050.006 0.034 0.006 0.053 0042 0.003 0.025 0.021 0017 0.014 0.01 0009 0.007 0006 0.005 0.004 0.003 O 026002070101 0.125 0.098 0.025 0.000 0.047 0.037 0029 0,023 0.018 0.014 0.011 0.009 0.007 0.008 0.0050004 0.0000002 023302550 0-130 016 OOO 0009 0.054 0.042 0.033 0028 0.020 0.0160.002 0010 0.000 0.006 0005 0.001 0.003 00020002 0.321 020 00 0:00 0.082 0.060 0.03 0.037 0.029 0.0220017 0.014 0.011 0.008 0.006 0.005 0.0040.003 0.002 0.002 0.002 001 0.099 0.075 0.057 0.04 0.030 0026 0.020 0,015 0012 0009 0.007 0005 0.004 0.003 0.000 0.002 0.002 0.001 020000 0.097 0.067 00 0032 0.0220015 0.008 0.005 0.001 0.003 0.002 0.001 0.001 0.001 0000 0000 0000 0000 0.000 O BLOD 5 LOSO Z WENN RRRRRR COSO TILO O DOO ILDO HABIT SA-2 Precent Value of an Annulty of SinArmour + (-a 13 24 Periods 1 2 3 4 5 . 7 8 9 10 TE 12 13 14 15 10 T 18 19 20 4 5 63 99 109 14 15% 16% 109 199 20% 211 224 0.963 221 0.952 0940 0.935 0.026 0.907 0.900 0.901 0.990 0.865 0.877 0.870 0.862 0.855 0.847 08400833 0126 0320 0.80 0.006 0800 1836 1859 1833 1300 1783 1759 1736 1713 1690 1668 1647 1626 1605158515661547 1.457 1440 2.775 2.723 2673 1528 1509 1492 1474 2624 2572 2501 2.487 2444 2.402 2361 2322 223 2246 2210 2174 2.140 2106 2074 2012 2011 1901 1952 3630 3.546 3.485 3337 3.12 3.240 31703102 3037 2.974 2.914 2655 2.79827432690 2639 2589 2540 2.494 2448 2.404 2.362 4452 4.329 4212 4.100 3.9933.000 3.791 3.696 3605 3.517 3433 3352 3274 3199 3127 3050 2.991 2926 2964 2.303 2745 2689 5.242 5.070 4917 4767 4623 4136 4355 4.2314 3.9983.8893.784 368535893.498 3410 3.326 3245 3167 3.092 3.020 2.951 6.002 5736 5.582 5.389 5.206 5.033 4.368 4712 4.564 4423 4288 4160 40393.922 3.812 37063805 3.508 3416 3327 3.242 3.161 6733 6403 6210 5.971 5747 5 535 5305 5140 4968 4799 4.639 4487 4344 4.207 4078 3.954 3.837 320 3619 3.518 3.421 3.329 7435 7300 6302 6.55 5.247 5.995 5.7595.537 5328 5132 4.9464772 4.507 4451 4.303 4163 4021 3.905 3.796 3.673 35663.460 111 7722 7360 7024 6710 6.419 6.545 5.899 5650 5.428 5.216 5.019 4833 4659 4.494 43394.192 4.054 2923 3.799 3682 3.571 8.750 83067887 2490 7139 6,805 6.495 6.207 5.908 5.687 5.453 5.234 5.029 4836 4658 4496 4.327 4177 4035 3.902 3770 3.656 9.385 38638384 790 7536 2161 6. 814 6.492 6194 5.918 5.660 5421 5.197 4988 47934611 4.439 42784127 3.985 3851 3.725 9.00 9.394 2153 8.358 7904 7487 7103 6.750 6.424 6.122 58425583 5.342 5118 4910 47154533 4362 4.203 4.05) 3.912 3780 10.563 9.899 9.295 375 8.244 7796 2367 6.9026628 6302 6002 5.724 5.468 5229 5.000 48024611 4432 42654508 3.902 3.024 11118 1033097 9.00 8.5598.061 7606 7191 68116462 6.142 5.347 5.575 5324 5.092 4.876 46754489 4315 4.153 4001 3.850 11652 103310694 8.850 8313 7.82473796,974 6604 6.265 5.954 5.668 5.405 5.1624938 4730 4526 4.357 4189 4033 3.887 12.156 11274 10729763 9122 8.544 8.022 7549 2120 67296.373 6047 5.749 5.475 5.222 4990 4775 4.57543914219 4059 3910 12.659 1690 1082100599372 8.756 8 201 2702 7.250 6.840 6.467 6128 5.818 5.534 5.2735033 4.012 4602 4419 4243 4.000 3.928 04 12085 115 10236 9.604 8.950 8.365 783923666.938 6.550 6.1985.8775.584 5.316 5070 4.943 4635 44424.263 4,097 3942 3500 2.46200 10.5949318 9129 8.51479637469 70256,623 6.259 5.9295,628 5.353 5101 4.870 4657 446042794110 3.954 14.029 12.82111064 10835 10.00 9.292 8.649 8.075 75622102 6.687 6312 5.973 5665 5384 5127 4.891 4675 4 475 42924121 3.963 14.451 12.042 1061 10 201 9.442 8.722 8.178 7615 7170 6703 6.359 6011 5.696 5.410 5149 4.909 46904.438 4.302 4.30 3.970 54.357 12230311272 10.17 9.580 8.8838.266 2718 7230 6792 6.399 6044 5723 5.432 5167 4925 4703 1.499 4371 4.137 3.976 15.247 13.799 12.550 11469 10.5299707 8-985 83482784 2283 6835 6.434 6.073 5746 5451 5182 4.937 4713 4.507 4318 4143 3981 15622 14.094 12783 165490.675 S823 9.077 8.422 784373306873 6464 6.097 5766 545751954948 4721 4514 4323 4147 3.985 5.983 149752003826 0.810 9.929 9161 8.488 2896 7372 6.906 6.491 6.118 5783 5.430 5205 4.9564728 4.520 4328 4.151 3.998 15330145433.211 1957 10 935 10.027 9.237 8.548 79437409 5.935 6514 5.136 5.798 5.492 5.215 4.964 4734 4.524 4332 4154 3990 16.663 14.999 3.406 12.07 105 10.156 9.307 8.602 79047441 6.961 6534 6152 5.810 5.502 5.223 4970 473945284335 4.157 3.992 16.98415141 1227071158 10.150 9370 8.650 8.022 7470 6.983 6551 5166 5.820 5.510 5.229 4 975 4743 4.531 433741593994 12292 15372 3705 12.409 TL250902749.427 8.694 8.65574967000 6566 6177 5.829 5.517 5.235 4.9794.7464.534 43394.1603.995 19.790 17159 15.046 1202_11.825 10.752 779 8951824 7634 7905 6.642 6233 5871 5.543 5.258 4997 4.7604544 4.347 8.1663999 SONRX99X8S 22 23 24 25 26 27 28 29 30 40