Should Kyoko lease or purchase? Kyoko is considering the purchase of a Porsche Boxster and has negotiated a final price of $48,100. She's trying to decide whether to lease or purchase the vehide. If she leases, she'll have to pay a $500 security deposit, a capital cost reduction (down payment) equal to 10% of the vehide's cost, and monthly payments of $652 over the four-year term of the closed-end lease. The Porsche will have a residual value of $19,240. On the other hand, if she buys the Porsche, she'll have to make a 10% down payment, pay sales tax equal to 5% of the vehide's price, and make monthly payments of $977 on a four-year loan that charges 4% interest Be aware that funds used as down payments and security deposits incur an opportunity cost of 3%, as they could have earned interest for Kyoko over the period of the lease or loan. Use the automobile lease-versus-purchase analysis worksheet that follows to determine the total cost of both the lease and the purchase strategy for Kyoko. To complete the worksheet, enter the appropriate values in their corresponding blanks. (Note: Round each value to the nearest whole dollar) Amount ($) LEASE 1a. $ 4,810 1b. 500 1c 5,310 2. Item Description Initial Payment Capital Cost Reduction 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 48 652 3. 4. 36,606 X X 5. 159 6. 0.00 43,009 7. Points: 0.63/1 PURCHASE Amount (S) 48, 100 8 Item Description Purchase Price Down Payment Sales Tax on Purchase 9. 4,810 2,405 10. PURCHASE Item Description 8. Purchase Price Amount (S) 48,100 4,810 2,405 977 9. Down Payment 10. Sales Tax on Purchase 11. 12 51,706 X 13. Monthly Loan Payment Total Payments over Term of loan Opportunity Cost of Down Payment Estimated Vehide Value at End of loan Total Cost of Purchase 144 14. 19,240 15. 51,850 X Points: Based on this analysis, Kyoko should: Use the loan to purchase the Porsche, because its total cost is less than the total cost of a lease transaction. Use the lease to purchase the Porsche, because its total cost is greater than the total cost of a purchase transaction X Use the lease to purchase the Porsche, because its total cost is less than the total cost of a loan transaction