Q1. One of my of my students is graduating soon. She accepted a job offer where she will be living away

from her family for the next couple of years. She is in the market looking for a new car and she needs

your help on whether she would finance or lease her new car. Since she does not know yet if she is going

to stay in the new job or not, she wants a short term commitment, lets say three years.

She is currently looking at the 2016 Toyota Corolla. Based on the Finance and Lease Offers attached and

the fact that her opportunity cost is 7%, what is your recommendation? To Finance or Lease? A detailed

and complete analysis is required to support your claims.

Here is a list of the things that you have to take in consideration to better analyze this problem:

1. Her credit score qualifies her for the offer.

2. If the car is finance, she has to sell it back to the dealership or to a private-party.

3. If the car was rented, she has to return it to the dealership without worrying about finding

someone to buy it.

4. The dealership will buy the car back from her at the Trade-in Value, while the private party will

pay the Private Party Value of it. You can find more about Trade-in and Private Party Values in

Kelly Blue Book. (Note: use value for a 3-year old (2013) Toyota Corolla for that purpose).

5. Pay attention to the maintenance cost under the Finance and Lease options, as it may change your

answer. To get more details how much it costs to maintain the corolla over the 3-year period, go

to http://www.edmunds.com/toyota/corolla/2016/sedan/cost-to-own/

6. Finally, assume that she will not drive more miles than what the lease option dictates.

Note: feel free to make any other necessary assumptions to solve this problem. Just do not ignore any of

the items list above. For instance, dont assume that you will drive the car for three full years without

maintain it.

Note:

A detailed and complete analysis for the problem is required; unnecessary or additional

details may be included in the project appendix. All documents, including any work conducted on

excel spreadsheets should be emailed to me before the due date.