Question 1 (10 marks) Part A (5 marks) James is planning to buy a new car. He can either lease the car or purchase it outright with cash. Current market price of the car is $52,000. Under the leasing arrangement, he is required to pay $5,000 today and $600 per month for the next three years. As per the lease agreement James must return the car to the car dealer at the end of the three-year period. If he purchases the car outright with cash, he will pay it off all at once on the date of purchase. If he purchases the car outright with cash, James believes that he will be able to sell the car for $30,000 at the end of three years. If James had to borrow the money to pay for the car, he would have been able to secure finance at a rate of 6 percent (discount rate) per annum (0.5 percent monthly rate). 1. Analyse the information presented above about the leasing and outright cash purchase options for the car. Determine if James should lease or buy the car outright. Show your calculation for lease option and outright cash purchase option separately. (5 marks) Canterbury Institute of Management, 41 McLaren Street, NORTH SYDNEY NSW 2060 Australia