The management at Hackney's Southwestern Regional (HSR) are interested in determining the

optimal fleet purchase mix for the coming year. There are four types of vehicles that can be

purchased: standard, intermediate, compact and subcompact. All cars purchased are depreciated

and paid off for over a two year period, after which they are sold in a secondary market. Table 1

presents the wholesale purchase price and revenues (the second year includes the resale value)

over the two year period for each type of car

HSR has established a budget of $5 million for funding the purchases this year. It can either pay

the entire amount for the cars or make a down payment and pay the remaining balance over a

two year period. The financing company requires at least a 20% down payment and that at least

50% of the purchase price plus interest must be paid by the end of the first year. The financing

company is currently charging 8%. HSR uses a 10% discount rate for financial planning. Hackney management estimates that they can rent all of the cars

that are purchased. However, in order to meet overall market demand they wish that each vehicle category represent at least 15

percent and no more than 50 percent of the total number of vehicles purchased

What is the maximum discount rate that supports paying for the cars over time? Please show steps

Table 1