The Riteway Ad Agency provides cars for its sales staff. In the past, the company has always purchased its cars from a dealer and then sold the cars after three years of use. The company's present fleet of cars is three years old and will be sold very shortly. To provide a replacement fleet, the company is considering two alternatives: Purchase alternative: The company can purchase the cars, as in the past, and sell the cars after three years of use. Ten cars will be needed, which can be purchased at a discounted price of $17,000 each. If this alternative is accepted, the following costs will be incurred on the fleet as a whole: Annual cost of servicing, taxes, and licensing Repairs, first year Repairs, second year Repairs, third year $ 5,000 $ 2,900 $ 5,400 $ 7,400 At the end of three years, the fleet could be sold for one-half of the original purchase price. Lease alternative: The company can lease the cars under a three-year lease contract. The lease cost would be $69,000 per year (the first payment due at the end of Year 1). As part of this lease cost, the owner would provide all servicing and repairs, license the cars, and pay all the taxes. Riteway would be required to make a $14,500 security deposit at the beginning of the lease period, which would be refunded when the cars were returned to the owner at the end of the lease contract. Riteway Ad Agency's required rate of return is 19%. Click here to view Exhibit 12B-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using tables. (Use the tables to get your discount factors. The linked tables are the same tables as the ones in your course packet. If you calculate discount factors using Excel or a financial calculator, your answer may be different enough due to rounding that the system will mark it wrong.) Required: 1. What is the net present value of the cash flows associated with the purchase alternative? 2. What is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? Riteway Ad Agency's required rate of return is 19%. Click here to view Exhibit 12B-1 and Exhibit 128-2, to determine the appropriate discount factor(s) using tables. (Use the tables to get your discount factors. The linked tables are the same tables as the ones in your course packet. If you calculate discount factors using Excel or a financial calculator, your answer may be different enough due to rounding that the system will mark it wrong.) Required: 1. What is the net present value of the cash flows associated with the purchase alternative? 2. What is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the net present value of the cash flows associated with the purchase alternative? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value Required 1 Required 2 > Riteway Ad Agency's required rate of return is 19%. Click here to view Exhibit 12B-1 and Exhibit 12B-2, to determine the appropriate discount factor(s) using tables. (Use the tables to get your discount factors. The linked tables are the same tables as the ones in your course packet. If you calculate discount factors using Excel or a financial calculator, your answer may be different enough due to rounding that the system will mark it wrong.) Required: 1. What is the net present value of the cash flows associated with the purchase alternative? 2. What is the net present value of the cash flows associated with the lease alternative? 3. Which alternative should the company accept? Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 What is the net present value of the cash flows associated with the lease alternative? (Enter negative amount with a minus sign. Round your final answer to the nearest whole dollar amount.) Net present value EXHIBIT 128-1 Present Value of $1, (1+r)" Periods 4% 5% 6% 7% 1 2 3 0889 0.864 0.840 4 0.855 0.823 | 0.792 0.763 0.735 5 0.822 0.784 0.747 0.713 | 0.681 | 0.650 6. 0.790 0.746 | 0.705 | 0.666 0.630 0.596 0.564 7 0.760 0.711 0.665 0.623 0.583 0.547 0.513 8 0.731 0.677 0.627 0.582 0.540 0.502 9 Q.703 0.645 0.592 0.544 0.500 0.460 10 0.676 0.614 0.558 0.508 0.463 0.422 11 0.650 0.585 0.527 0475 0.429 0.388 12 0.625 0.357 0497 0.444 0.397 0.356 13 0.601 0.530 0469 0415 0.368 0.326 14 15 16 17 18 19 20 0.534 0458 0.394 0.513 0436 0.371 0494 0416 0.350 0475 0.396 0.331 0456 0377 21 22 23 24 25 26 27 28 0.296 0.250 0.212 0.277 0.232 0.194 0312 0258 0.215 0.178 0439 0.359 0.294 0.242 0.199 0.164 0422 0.342 0.278 0.226 0.184 0.150 0406 0.326 0.262 0.211 0.170 0.18 0.112 0.390 0.310 0247 0.197 0.158 0.126 0.102 0375 0.295 0231 0.184 0.146 0.116 0361 0.281 0.220 0.172 0.135 0.106 0.347 0.268 0.207 0.161 0.125 0.098 0.333 0.255 0.196 0.150 0.092 0.074 0.084 0.066 0076 | 0060 0.116 0090 0.069 0.054 29 30 0.321 0243 0.185 0141 0308 0231 0.174 0131 40 0107 0082 0063 0048 0.099 0.075 0057 0044 0.208 0142 0097 0.067 0.046 0032 0022 0015 0082 0.066 0.053 0059 0047 0.053 0042 0047 0037 0.012 0.033 0.026 0.020 0016 0.037 0029 0.022 0017 0014 0033 0.026 0020 0015 0012 0.011 0.008 0.005 0004 0.003 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 24% 25% 0.962 0.952 0.943 0.935 0.926 0.917 0.909 0.901 0.893 0.885 0.877 0.870 0.862 0.855 0.847 0.840 0.833 0.826 0.820 0.813 0.806 0.800 0.925 0.907 0.890 0.873 0.857 0.842 0.826 0812 0.797 0.783 0.769 0.756 0.743 0.731 0.718 0.706 0.694 0.683 0.672 0.661 0.650 0.640 0.816 0.794 0.772 0.751 0.731 0.712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0.512 0.708 | 0.683 0.659 0.636 0.613 0.592 0.572 0.552 0.534 0.516 0.499 0.482 0.467 0.451 0.437 0423 0.410 0.621 0.593 0.567 0.543 0.519 0497 0.476 0.456 0.437 | 0.419 0.402 0.386 0.370 0.355 0.341 0.328 0.535 0.507 0.480 0.456 0.432 0410 0.390 0.370 0.352 0.335 0319 0.303 0.289 0.275 0.262 0.482 0.452 0425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.249 0.235 0.222 0.210 0.467 0434 0.404 0.376 0.351 0.327 0.305 0.285 0.266 0.249 0.233 0.218 0.204 0.191 0.179 0.168 0.424 | 0.391 0.361 0.333 0.308 0.284 0.263 0.243 0.225 0.209 0.194 0.180 0.167 0.155 0.144 0.134 0.386 0.352 0.322 0.295 0.270 0.247 0.227 0.208 0.191 0.176 0.162 0.149 0.137 0.126 0.116 0.107 0.350 | 0.317 | 0.287 0.261 0.237 0.215 0.195 0.178 0.162 0.148 0.135 0.123 0.112 0.103 0.094 0.086 0319 0.286 0.257 0.231 0.208 0.187 0.168 0.152 0.137 0.124 0.112 0.102 0092 0.083 0.076 0.069 0.290 0.258 0.229 0.204 0.182 0.163 0.145 0.130 0.116 0.104 0.093 0.084 0.075 0.068 0.061 0.055 0.577 0.505 0.442 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0.125 0.111 0.099 0.088 0.078 0.069 0.062 0.055 0.049 0.044 0.555 0481 0417 0.362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.108 0.095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 0.339 0.292 0.252 0.218 0.188 0.163 0.141 0.123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028 0.317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.069 0.060 0.052 0.045 0039 0.034 0.030 0.026 0.023 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0.051 0.044 0038 0.032 0.028 0.024 0.021 0.018 0.164 0.138 0.116 0.098 0.083 0.070 0.060 0.051 0.043 0.037 0.031 0.027 0.023 0.020 0.017 0.014 0.149 0.124 0.104 0.087 0073 0.061 0.051 0.043 0.037 0.031 0026 0022 0019 0.016 0.014 0.012 0.135 0.112 0.093 0.077 0.064 0.053 0.044 0037 0.031 0.026 0.022 0.018 0.015 0.013 0.011 0.009 0.123 0.101 0.083 0068 0.056 0046 0038 0.032 0.026 0.022 | 0018 0.015 0.013 0.011 0.009 0.007 0.091 0074 0060 0049 0040 0.033 0.027 0.022 0.018 0.015 0.0120010 0.009 0.007 0.006 0043 0035 0.028 0023 0.019 0.010 0.008 0.007 0.006 0.005 0038 0.030 0.024 0020 0016 0.013 0.010 0.009 0.007 0.006 0.005 0.004 0033 0.026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 0.029 0023 0.018 0014 0011 0.009 0.007 0.006 0.005 0.004 0.003 0.012 0.010 0.008 0.006 0.005 0.004 0.003 0.002 0.011 0.008 0.006 0005 0.004 0.003 0.002 0.002 0.009 0.007 0.005 0.004 0.001 0.001 0.002 0.002 0002 0001 0.001 0.001 0000 0000 0.000 0.000 0015 0013 0.002 0.002 0.002 0.001 0.000 EXHIBIT 12B-2 Present Value of an Annuity of $1 in Arrears; 1/(1-(1/(1+r)*)) Periods 4% 5% 1 0.962 2 1.886 3 2.775 1859 1.833 2.723 2.673 4 3.630 3.546 3.465 5 4.452 4.329 4.212 4.100 6% 7% 8% 9% 0.952 0.943 0.935 0.926 0.917 0.909 1.808 1.783 1.759 1.736 2.624 2.577 2.531 2487 3.387 3.312 3.240 3.170 3.993 3.890 10% 13% 14% 0.885 0.877 1.647 3.791 6 5.242 5.076 4917 4.767 4.623 4.486 4.355 7 6.002 5.786 5.582 8 6.733 6.463 6.210 9 7435 7.108 10 5.206 5.033 5.971 5747 5535 6.802 6.515 6.247 5.995 8.111 7.722 7.360 7.024 6.710 5.389 4.868 5.335 11 8.760 8.306 7887 7499 7.139 12 9.385 8.863 8.384 7.943 7.536 6.418 6.805 7.161 13 14 15 16 17 18 19 20 21 8649 22 23 24 25 26 27 28 6.961 29 30 40 11% 12% 0.901 0.893 18% 19% 20% 21% 22% 23% 24% 0.862 | 0.855 0.847 0.840 | 0.833 0.826 | 0.820 | 0.813 0.806 0.800 1.713 1.690 1.668 2.444 2.402 2.361 2.322 2.283 1.626 1.605 1.585 1.566 1.547 1.528 1.509 1492 1.474 1457 1440 2.246 2.210 2.174 2.140 2.106 2.074 2.042 2011 1981 1952 3.102 3.037 2.974 2914 2.855 2.798 2.743 2.690 2.639 2.589 2.540 2494 3.696 3.605 2.448 2.404 2.362 3.517 3.433 3.352 3.274 3.199 3.127 4.231 3.058 2.991 2.926 2.864 2.803 2.745 2.689 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 4.712 4.564 3.326 3.245 3.167 3.092 3.020 2.951 4.423 4.288 4.160 4.039 3.922 3812 3.706 5.146 3.605 3.508 3.416 3.327 3.242 3.161 4.968 4.799 4.639 4.487 4.344 4.207 5.759 5.537 5.328 5.132 4.946 4.772 4.607 4078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 4.451 4.303 4.163 4.031 6.145 5389 5.650 5426 5.216 5019 4.833 3.905 3.786 3.673 3.566 3.463 4659 4494 4.339 6.495 4.192 4.054 3.923 3.799 6.207 5.938 5.687 5.453 5.234 5029 4.836 3.682 3.571 4.656 4.486 6814 6.492 6.194 5.918 5.660 5421 4.327 4.177 4.035 3.902 3.776 3.656 9.986 9.394 8.853 8.358 7.904 7487 7.103 5.197 4.988 4.793 4.611 4.439 4.278 4.127 3.985 3.851 3.725 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4.910 4.715 4533 4.362 10.563 9.899 9.295 8.745 8.244 7.786 7.367 4.203 11.118 10.380 9.712 6.982 6.628 6.302 6.002 4.053 9.108 8.559 8.061 5.724 5.468 5.229 5.008 3.912 3.780 7.606 7.191 4.802 4.611 4.432 4.265 4.108 11.652 10.838 10.106 9447 6.811 6462 6.142 5.847 3.962 3.824 8851 8313 5.575 5.324 5092 4876 4.675 4489 4.315 4.153 12.166 11.274 10.477 9.763 9.122 8.544 022 7.824 7379 6.974 6.604 6.265 4.001 5.954 5.668 5.405 5.162 4.938 4.730 4536 4.357 4.189 4.033 3.859 12 659 11 690 10 828 10.059 9.372 8.756 8.201 7.549 7.120 6.729 6.373 6.047 5.749 5.475 5.222 3.887 7.702 7.250 16.840 6.467 6.128 4.990 4.775 4.576 4.391 4.219 13.134 12.085 11.158 10.336 9604 8950 8365 7839 7.366 6938 4.059 3.910 5818 5534 5.273 5.033 4812 4.608 4.419 4243 13.590 12.462 11470 10.594 9818 9.129 8514 7.963 6.550 6.198 5.877 5584 5316 5070 4.080 3.928 4.843 4.635 14 029 12.821 11.764 10.836 10.017 9.292 7469 7025 4442 4.263 6.623 6.259 5.929 5.628 5353 5.101 4.097 3.942 4.870 4.657 4460 4279 4.110 3954 14.451 13.163 12.042 11.061 10.201 8075 7.562 7.102 6.687 6312 5973 5665 5.384 5.127 9.442 8.7728.176 7645 7.170 6743 4.675 4476 4.292 4.121 14357 13.489 12.303 11 272 10.371 9.580 8883 6.159 6011 3.963 5696 5.410 5.149 4.909 15.247 13.799 12.550 11.469 10.529 9.707 8985 8.366 7.718 7.230 6.792 4.690 4.488 4.302 6.399 6044 5.723 5432 5.167 4.925 4.130 3970 15 622 14 094 12.783 11 654 10 675 9823 9077 8.348 7.784 7.283 6.835 6434 4.703 4.499 4311 4.137 3976 6073 5.746 5451 5.182 4.937 15.983 14.375 13.003 11826 10810 9.929 9161 8.422 7843 7.330 6.873 4713 4507 4318 6.464 6097 5.766 5.467 5.195 4.143 3.981 16.330 14.643 13.211 11.987 10.935 10 027 9.237 8.548 7.943 7409 6935 8488 7396 7372 6.906 4.721 4514 4.323 4.147 6.491 6.118 5.783 5.480 5.206 16.663 14.898 13.406 12.137 11.051 10.116 9.307 602 7984 7441 4956 4.728 4.520 4.328 4.151 3.988 6514 6.136 5.798 5.492 5215 4964 4.734 16.964 15.141 13.591 12 278 11.158 10.198 9370 650 022 7470 6983 6551 6.166 4.524 6.534 6.152 4.332 4.154 3.990 5.810 5502 5223 4.970 17.292 15.372 13.765 12.409 11 258 10 274 9.427 4.739 4.528 4.335 41573992 5820 5510 5229 4975 19.793 17.159 15.046 13.332 11 925 10.757 9.779 8951 $244 7634 7.305 6642 6233 5871 5548 5258 4997 4.760 8.694 8055 7496 7003 6.566 6.177 5.829 5517 5235 4979 4.743 4531 4.337 4.159 3994 4.746 4334 4.339 4.160 3.995 4544 4347 4.166 3.999 15% 16% 17% 25% 0.870 4.891 4.948 3985