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 can be purchased at a discounted price of $19,000 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 $ 5,200 $ 3,100 $ 5,600 $ 7,600 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 $71,000 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 $15,500 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 15%. Click here to view Exhibit 148.1 and Exhibit 14B-2, to determine the appropriate discount factor(s) using tables. 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? EXHIBIT 148-1 Present Value of State Periods 1 2 -- 4 1 6 7 10 12 14 15 4 5% 6% 7% BX 95 109 125 12% 145 15% 16% TP- 10 199 2011 275 22% 224 243 25% 0.962 0.952 0943 0935 0.926 097 0.909 0.901 0.893 0885 087708700862 0855 0807 0940 02 0826 0820 0.00 0.806 0.900 0925 0.9070890 0.873 0857 0342 0326 0.812 0.797 0783 0.769 0.756 0743 0731 0718 0.7060594 0683 0672 0661 0650 0.640 0819 0 0240 0 0 0 051 0 072 0.690 06750658 0.541 0624 0609 0593 0579 0564 0551 0537 0524 0512 0.855 0823 0.792 0.763 0.735 0.78 0.683 0659 0.636 0.613 0.592 0.572 0.552 0534 0.516 0.499 0482 0.467 0451 0237 0423 0.450 0.822 0.784 0747070 0.681 0650 0621 0.593 0.567 0543 05190.497 0476 0.456 0437 0.419 0.4020396 0.370 0355 0.341 0.328 0.790 0.746 0705 0666 0.630 0.596 0564 0.535 0.507 0130 0.455 0.432 0.410 0.390 0.370 0352 0.375 0.319 0.303 0.289 0.275 0.262 0.760 0711 0.665 0623 0.583 0.547 0513 0.482 0.452 0425 0.400 0.376 0.354 0333 0.3140296 0279 0.263 0249 0235 0.222 0210 0.731 06770627 0.582 0.540 0.502 0.467 0434 0.404 0.376 0351 0327 03050285 0266 0249 0233 02130204 0191 0779 0168 0.7030645 0.592 0544 0.500 0.460 0424 0.391 0.361 0.333 0.308 0.284 0263 0.247 0.225 0209 0194 0190 0.155 0.54 0134 0.676 0.014 0.558 0.508 0.463 0422 0.386 0352 0.322 0295 0270 0247 0227 0208 0191 0.176 0.162 01490137 OTE OTHE 0107 0.650 0.585 0527 0.475 0.429 0.388 0.350 0.31 0.287 0261 0.237 0.25 0.195 OPE 0162 0.140 0.05 0.123 0.112 0.103 0.094 0006 0625 0.557 0.497 0.444 0.397 0.356 0.319 0.266 0.257 0231 0208 0187 0168 0152 0137 0124 0112 0.102 0.092 0083 0.075 0009 0.001 0.530 0469 0.45 0.368 0.326 0290 0.250 0.229 0204 0182 0163 0145 0.030 0.116 0104 0093 0084 0.075 0.068 0.061 0.055 0.577 0.505 0442 0.388 0.340 0.299 0.263 0232 0.205 0181 0160 0141 075 0 0099 0.003 0.078 0.059 0062 0055 0049 0.044 0.555 0.481 0417 0.362 0.315 0.275 0.2390209 0163 01600140 0123 0108 0.095 0.084 0.074 0005 0057 0.0510005 0040 0.035 0.534 0.458 0.394 0.309 0292 0.252 021801880163 0.5410123 0107 0.093 0.081 00710062 0054 0017 0042 0.035 0.032 0.028 0.50 0.436 0371 0.270 0231 0198 01700146 01250108 0.093 0.080 0000 0060 0052 0045 0009 0.034 0030 0026 0.023 0.494 0.45 0350 0.296 0.250 0.212 0190 0153 0.13001 0.095 0.081 0.069 0.059 0051 0044 0.038 0.032 0028 0024 0.021 0.015 0.475 0.396 0.331 0.277 0.232 0.194 0164 0.138 0.118 0.098 0083 0070 0.060 0.051 0.003 0.037 0.031 0.027 0.023 0020 0.007 0044 0.456 0.37 0.312 0.250 0.2150178 0.149 0.1240104 0087 0.073 0.001 0.051 0043 0037 0,034 0026 0.022 0.019 0.0160.04 0.012 0.439 0.359 0294 0242 0.199 0.164 0135 0.112 0.093 0077 0064 0053 0044 0.037 0031 0026 0022 0.01 0015001 0 0.000 0.422 0.342 0.278 0.226 0.134 0.150 0.123 0101 0.003 0.068 0.056 0.046 0038 0.032 0.026 0.022 000 0015 000 00110009 0.007 0.406 0.326 0.262 0211 2.JPG 0139 01120091 0.074 0.060 0049 0.040 0033 0.027 0022 0018 0015 0.012 0010 0009 0.007 0.006 0.990 0.310 0.2470197 0.158 0.126 0102 0.002 0006 0.053 0043 0.035 0.028 0023 0.019 0015 0.013 0.010 0.008 0.007 0005 0.005 0.375 0.295 0.2330104 0.140 016 0092 0074 0.059 0047 0038 0.030 0024 0.020 0010 000 0010 0.009 0.007 0.006 0.005 0.004 0.361 0.21 0.220 0172 O.US 0306 0034 0.066 0.053 0.042 0.033 0025 0.021 0.01 0.014 0.01 0009 0.007 0.000 0.005 0.001 0.003 0.347 0.200 0207 0.101 0.125 0.098 0076 0.000 0047 0.037 0.029 0.023 0018 0.01 0.011 0.0090007 0000 0005 0004 00000002 0.33 0.265 0196 0150 0176 0.090 0009 0.054 0.042 0033 0,026 0020 0.035 0.012 0.010 0000 0.005 0.005 0.004 0003 0.002 0.002 0.321 0243 0195 0 141 0.102 0.062 0063 0.043 0.037 0.029 0.02200170014 001 0.008 0006 0.005 0.004 0.000 0002 0.002 0002 0.308 02310174 NISH 0.009 0075 0057 004 0030 0.026 0020 00150012 0009 0.007 0005 0.004 0.000 0.003 0.002 0002 0.00 0208 02 0097 0.002 0.046 0.032 0022 0.015 0011 000 0005 0.004 0000 0.002 0.001 0.001 0.001 0.000 0.000 0000 0000 0000 0.30 18 19 20 21 22 23 24 25 20 27 28 29 30 40 BABT 1403 Print Value et en Anrulty of Sin wert-- Periods 1 2 SZE 4 5 6 7 5 10 11 12 4 15 16 5% 9 10% IN Us 154 10% 17 199 200 213 0.9520952 000 29 241 255 0905 0.926 0907 0.909 0.901 0.19 0.005 03770870 0362 0155 0.347 0340 083 0825 0.020 080 0.005 0.800 1806 1050 1000 1780 10 1736 10 1690 1660 161 1626 1505 156 1560 1547 1528 1509 1492 141414571440 2725 2723 2673 2624 2577 2.531 2487 2414 2402 2361 2322 223 2246 2210 211 2140 2005 2004 2042 2011 1901 1952 3.600 1540 3.405 3.387 2302 3240 300 302 3037 294 2944 2355 2798 273 2600 2630 2509 2540 2494 2.440 240L 2.362 482 1329 4.212 4100 1991 1990 3.791 3.696 1605 3.50 3.00 3.352 2274 2199 3127 2058 2.991 292628642302 2745269 5242 5.070 4.917 4767 4523 4480 435542314 3.9983309 3.7843605 3589 3490 3.410 3.326 3245 373093 3020 2.951 60025706 5.582 5359 5.206 5013 4.300 4712 4564 4423 4200 460 4039 2922 3812 37063605 3.508 3416 3.327 3.242 361 6.733 6.653 6.210 507 5707 5.535 5325 564960 479 4.639 4437 43444207 407 3.954 207 3726 361925334213329 7435 7100 0.002 6.515 620 5.095 5.750 5.507 532 50245464772 46074451 4.303 433905 3786 3573 1566 3:46 7722 7350 7024 6710 8.418 6.15 529 56505.065 216 5.099 400 4050 44 43 492405439233799 1682 3571 6.700 3.1067887 7499 7039 5.005 6.4956207 5070 5.67 5.35234502941084656 4406 427 417 4035 3923718 1656 9.35 000 2304 7943 7536 7161 6.846492 6.1 5.915660 561 5197 4900 4790 4611 409 4270407 9900 9948853 1905 11513725 1358 7904 7487 7103 0.750 6.424 6122 5.542 558) 5.542 5.8 4.910 471 411 412 401 4053391270 0561 99296 0745 1244 7780 7.366.902 6628 6.30 8.002 5724 540 5279 3008 4102 4611 442 4265 4900 3.2 3.324 10.00 9.70 9500 159 1061 7000 7100 60116462 6102575.575 5.124 5.092 4175 4.675 409 4.35415340013150 11052 1000 1000047 30 7824 736.94460046205 5054 566 540553624900 470 456 457 419 4.0333 0.66 TL2M10.7070 9122 8544 3022 7519 7130 6729 6.73 6.047 579 5.45 5222 4900 4775 4570 491 42194059 3910 1265016900 120 100599372 1750 8.20127027250 6.50 6.0 6.20 585594 5.273503043024608 409 410 4.000 1928 10341208515 103369604950 365 789 7300 699 6550 60575455650700465 4412 4200 4097 1942 2.50 2.412 1410 10.594 9:18 9:29 357903 74607025 6623 6.259 5929 5021 5353 51014704057445042794 3054 M029 02140136 1009292 68.075 2562 21026687 6.30 593 565 535452 40 467 408 429240 3063 12042 001 1020112 72 817 7615 710 670 6.350 600 5.40 50 49 469 440 439 410 1970 NOS 12 03 272 10171 9500 26 27 2230 6.2 6.30 GO 5721 542 51674925 4700 410 411 40 2570 520 6.799 12.50 11.40010529 0907 0915 327042200 6805 604 6073570 541 5102 499 470 4.507 48 49 2011 150 00 12.783 1654 1679023 90778422 2607330464 007 8766 5417 55 404 472145423410 3.95 5 143730000 1102009929 9160 A7006 2372 6000 600 57 5400 5200 4056 47284530 432 415 1330 160 21 2900 11 1999 027 0237 548 790 7409 695 6544 6065790 5.492 525 49644734452 412 41541990 1663 400 06 1207051019 9307 1.602 7914 7441 69116534 615250 5.502 5223497067394528 435 4153902 18.954 15 0122711158 10.190 9110650 30222470 690 6551 6.166 5820 5510 5229 4975 4743451 434150 1984 11292 15172705 000 11.250 10240427 368055 74 700 56 6177 5829575235497474 25344300 4100195 379177159 15045 112 119250757 9779991 024 763471056612 620 587 3.545250447604544 43474999 A 10 19 20 21 23 24 25 20 27 20 29 30 10