Select the discount rate. The term of the lease analysis is three years, so we will use the nominal discount rate for three years, 1.6%.

Read the scenario below and answer the questions that follow. Two offerors have submitted proposals for the same requirement. Offeror A proposes a lease with payments of $9,000 at the beginning of each year for 3 years, beginning at contract award, for a total of $27,000. Offeror B proposes a vehicle purchase for $27,000 due at contract award with a re-sale of $2,500 at the end of the third year. Determine which is the best offer for the government based on net present value analysis.

OFFEROR A Timing Cash Timeframe Discount Rate Discount Factor PV Flow (t) (i) (CF DF) X Award Month 13 Month 25 Month 37 TOTAL Net Present Value OFFEROR B Discount Rate (i) Timing Cash Timeframe Discount Factor PV Flow (t) (CF x DF) Award Month 13 Month 25 Month 37 TOTAL Net Present Value