Problem 14-25 (Static) Net Present Value Analysis of a Lease or Buy Decision [LO14-2] The Ribeway Ad Agency provides cars for its sales staff in the past, the company has always purchased its cars from a dealer and sold the cars after three years of use. The company's present feet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the company is considering two alternatives then Purchase alternative: The company can purchase the cars, as in the past, and sell the cars after three years of i can be purchased at a discounted price of $17,000 each. If this alternative is accepted, the following costs will be incurred en the fleet as a whole Annual cost of servicing, taxes, and Licensing Repairs, first year Repairs, second year Repairs, third year 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 $55,000 per year (the first payment due at the Year 13. As part a this lease cost, the owner would provide all servicing a repairs, license the cars, and pay all the taxes. Ritay uld eee security deposit period, which would beginning of the lease e cars were returned to the owner at the end of the lease contract. Rheway Ad Agency's required rate of return is 18% Click here to view Exhibit 1481 and Exhibit 14B-2. to determine the appropriate discount factor 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 atrative? 3. Which alternative should the company accept? Pret Value of $1 10 B 34 25 16 18 19 10% 14% CM 090 OMI 1915 096 0917 0900 00089) 0.885 0477 470 25 09070900475 0857 0842 0.826 32 679) 673 074 0756 0.749 0731 0714 0.540 08090364 08400816 374 0772 0.751 07 07 06 0475 GAME ME 04049 0500 63% 05 (3311 317 GASS OR 0043 3715 070 043 0459 0636 0613 0.50 0572 0552 0534 0516 [149] [64] [64 1451 947 0822 0784 0747 0713 04416656 06210995 056 0543 0519 0497 0.456 0.456 043704196400 0.790 6746 0706 0666 0430 0.59 0.564 0535 3500 AND 416 0452 0410 030370 020315 039 ONS 0.760 6711 6665 0625 0.383 0347 0513 0462 6.492 6415 0406 036 0354 0.333 6304 COM 0731 0477 0677 0583 502 0467 044 444 076 0361 0327 0305 0285 0266 0349 020 0218 67010645 0392 0344 0.500 0.460 0.44 0.91 ME 333 ON 0284 0263 0343 0229 06M ON le 0414 0358 0308 0463 0.422 0.386 0.352 C3 C3396 0266 0347 0227 0306 0.39 0.176 012 019 6ER One 050527 0475 0429 0.366 0.350 0317 0347 [0344|0237 0215 0195 0778160 0115 019 GAS 0387 0.497 0.444 0397 0356 0319 0266 0357 0234 0208 0187 0168 015 0197 0134 0112 00050 0409 0415 0368 0.336 0290 0264 0.329 034 0182 0163 0.145 0.130 0.116 0304 0.09000M 057 0505 0442 0388 0340 0209 0363 0252 0305 0181 0166 0141 0125 0.111 600000 [607 0555 0481 0417 0.362 0315 0295 0339 0209 0183 010 0140 0123 0108 0.095 604 604 605 0334 0.458 038 0399 0392 0352 0316 0188 0165 0341 0125 0107 009 01071602 0313 0436 0371 0317 020 0231 018 0176 0146 0.125 0.306 609) 0080 0069 060 0052 0.045 an 6.494 0.416 0.350 0.2 0250 0212 0180 0153 010 0111 065 6081 0009 0.059 0.0510044 00 0415 0.396 0331 0.277 0232 0194 0164 0118 0116 00080083 000 000 0051 0043 0037 0011 ag 0.456 0377 0312 0258 0215 0.178 0.349 0.124 0.104 0047 6675 6060051 0045 21 0.439 0359 0254 0242 0.199 0.164 0.135 0112 0093 0077 064 003 0044 0437 0.004 0.06 22 0.422 0.342 0276 0226 014 015 0121 000 0000680560046 00 0032 0005 0.022 0.016 CAT 23 0.406 0.336 0.362 0211 0170 0.16 0112 0:09 6014 000 0009 0040 0.033 0:027 6:022 0015 0015 001 24 25 00 0.390 0310 0247 019 014 015 010 02 0375 02395 0203 014 0146 0.116 0092 074 0.099 0.047 0038 0.000 0.024 0.020 0006 0013 0010 0 0066 00530043 0.035 0028 0423 6009 0015 0015 25 27 0361 0281020 012 0135 006 004 0066 6063 0.042 0033 0.006 0.021 0817 004 0347 03 0307 0141 0125 0006 0.076 0060 0.047 0.037 0029 0.023 0015 0040 0333 0255 0196 0.150 0.115 0.000 0.069 0.054 0.042 0033 90M 0011 0.009 0 00090007 0086 0005 0323 0243 0.185 0.141 0.107 0.082 0063 0048 0007 0.0% 0308 0231 0.174 0.131 0.099 0208 0.142 0.097 0.067 0.075 006 0044 0403 0.046 0.032 0.002 0015 0.00 EXHIBIT 148-3 Vale of an Aulty of $1 in Arrears, 1- Periode 45 15 45 76 15 165 175 S 0000000 OME ONE 093 0955 1956 0917 0 0 OF OBES 0877 0870 686 0895 MY OM LAST CAN CRD OR 13 24 15 16 5.343 500 4917 467 4671 4486 4355 4731 4111 3 6002 5.786 3582 5380 5366 3011 488 477 454 4425 4288 4340 400 3922 3812 306 3005 1500 3406 337 3342 3361 6733 6.469 6210 5971 5247 555 5315 3166 498 479 469 4487 4344 4207 4076 3964 387 3706 | 3419 | 3510 145 309 7435 7308 6802 6515 6347 505 5750 5507 5338 5132 4906 4772 4807 4451 4300 4163 401 3905 376 3875 3.566 3.463 KIII 22722 7360 7034 6570 6418 6345 5800 5450 5436 5216 5009 4833 4659 444 4339 4392 4054 3923 379 3882 3371 8700 8306 738774 719 6305 6.495 6307 598 584 5455 5234 500948364656 4486 4327 4377 4005 3902 3.776 3456 3854 3715 9006 90 1855 8.58 7904 7447 303 67506434 43122 5842 5563 5342 5.118 4910 4715 4535 4362 4305 45 244 7.786 7.367 6962 6628 6302 6002 5.724 5.466 5.229 5008 480 481 442 4265 4308 39462 3804 11318 10.380 93712 9.108 559 8061 7606 70 6811 6462 4342 5847 5575 5.334 5.092 4876 4675 44 4315 4153 4001 3859 ANTOR 0.106 9447 4451 45313 7424 7.379 6974 6604 6365 5554 5668 5.405 5.362 4938 47304536 437 4.1894055 3887 123 1234 DAY) 9783 9322 544 022 7549 7.120 6.729 6373 6047 5.349 5.475 5.222 4990 4775 4506 4301 4219 4.059 3910 1010599372 756 2017.02 7250 6.340 6.467 6.128 5.818 5534 5273 5.033 4812 4808 449 4243 4080 390 6350 6.198 5877 5.384 3316 5070 4843 4635 440 4.263 4.097 3942 1590 12462 470 105 981 9.129 4514 7963 7469 7025 6623 6259 5929 5628 5353 5301 487 4857 40 4279 4110 1954 10336 10017 9292 649 075 7562 7.302 6687 6312 5.973 5665 5384 5327 4801 4675 40 4200 4121 10201 9443 772 376 7645 7.170 6743 6359 6011 5.696 5.410 5.149 4309 4.0 4.488 4302 4300 3970 10.371 950 63 366 7.718 7230 6.792 6399 6044 5.723 5432 5.367 4905 4705 LAS 4311 4.337 3376 10329 9.707965 346 7.784 7283 6835 6434 607) 5.746 5.451 5162 4907 4713 4517 4318 4143 3941 9823 9077 422 7843 7330 6873 6.464 6097 5.766 5.467 5.195 4948 4721 4514 14451 13.36 64357 15247 TESSAS 16.330 16563 9929 9161 84 786 7372 6906 649 6118 5.763 5.480 5.206 4356 4700 4500 4308 4351 398 10027 9237 548 7543 7409 6905 6514 6.136 5.7 5.402 5215 4964 4754 4304 9.307 402 7564 7441 696 6534 6152 5810 5.502 5.223 4970 450 022 7470 6983 6551 6166 951 344 7634 7.305 6643 6233 5229 5215 4