Susan is considering the purchase of a Ford F-150 Pickup and has negotiated a final price of $27,690. She's trying to decide whether to lease or purchase the vehicle. If she leases, she'll have to pay a $500 security deposit, a capital cost reduction (down payment) equal to 10% of the vehicle's cost, and monthly payments of $375 over the four-year term of the closed-end lease. The truck will have a residual value of $11,076. On the other hand, if she buys the truck, she'll have to make a 10% down payment, pay sales tax equal to 7% of the vehicle's price, and make monthly payments of $563 on a four-year loan that charges 4% interest. Be aware that funds used as down payments and security deposits incur an opportunity cost of 5%, as they could have earned interest for Susan over the period of the lease or loan. Use the automobile lease-versus-purchase analysis worksheet that follows to determine the total cost of both the lease and the purchase strategy for Susan. To complete the worksheet, enter the appropriate values in their corresponding blanks. (Note: Round each value to the nearest whole dollar.) LEASE Item Description Amount ($) Initial Payment 1a. Capital Cost Reduction 1b. Security Deposit 1c. Total Initial Payment 2. Number of Months in Lease 3. Monthly Lease Payment 4. Total Payments over Lease Term 5. Opportunity Cost of Initial Payment 6. Estimated End-of-Term Charges 0.00 7. Total Cost of Leasing $ PURCHASE Item Description 8. Purchase Price 9. Down Payment 10. Sales Tax on Purchase 11. Monthly Loan Payment 12. 13. 14. 15. Total Payments over Term of Loan Opportunity Cost of Down Payment Estimated Vehicle Value at End of Loan Total Cost of Purchase Amount ($) Based on this analysis, Susan should: Use the lease to purchase the truck, because its total cost is greater than the total cost of a purchase transaction. Use the lease to purchase the truck, because its total cost is less than the total cost of a loan transaction. Use the loan to purchase the truck, because its total cost is less than the total cost of a lease transaction.