Shiloh is considering the purchase of a Ford Escape Hybrid and has negotiated a final price of $30,570. He's trying to decide whether to lease or purchase the vehicle. . If he leases, he'll have to pay a $550 security deposit, a capital cost reduction (down payment) equal to 10% of the vehicle's cost, and monthly payments of $542 over the three-year term of the closed-end lease. The Escape will have a residual value of $12,228. On the other hand, if he buys the Escape, he'll have to make a 10% down payment, pay sales tax equal to 5% of the vehicle's price, and make monthly payments of $812 on a three-year loan that charges4% interest. . Be aware that funds used as down payments and security deposits incur an opportunity cost of 396, as they could have earned interest for Shiloh over the period of the lease or loan. Use the automobile lease-versus-purchase analysis worksheet that follows to determine the total cost of both the lease and the purchase and then recommend the best strategy for Shiloh. To complete the worksheet, enter the appropriate values in their corresponding blanks. (Note: Round each value to the nearest whole dollar.) AUTOMOBILE LEASE-VERSUS PURCHASE-ANALYSIS Amount Item Description Initial Payment LEASE Capital Cost Reduction 1a. 1b. 1c. 2. 3. 4. 5. Security Deposit Total Initial Payment Number of Months in Lease Monthly Lease Payment Total Payments over Lease Term Opportunity Cost of Initial Payment Estimated End-of-Term Charges Total Cost of Leasing 0.00 7 PURCHASE 8 9. 10 Purchase Price Down Payment Sales Tax on Purchase Monthly Loan Payment 12 3. 4. 5. 6. 7 PURCHASE Monthly Lease Payment Total Payments over Lease Term Opportunity Cost of Initial Payment Estimated End-of-Term Charges Total Cost of Leasing 0.00 Purchase Price Down Payment Sales Tax on Purchase Monthly Loan Payment Total Payments over Term of Loan Opportunity Cost of Down Payment Estimated Vehicle Value at End of Loan Total Cost of Purchase 9. 10. 12 13. 14. 15. Based on this analysis, Shiloh should: O Use the lease to purchase the Escape, because its total cost is greater than the total cost of a purchase transaction O Use the leas e to purchase the Escape, because its total cost is less than the total cost of a loan transaction O Use the loan to purchase the Escape, because its total cost is less than the total cost of a lease transaction