The Riteway Ad Agency provides cars for its sales staff. Its 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:

At the end of three years, the fleet could be sold for one$-$half of the original purchase price.

Lease alternative:

Riteway Ad Agency's required rate of return is $16\%.$

Click here to view Exhibit $14$B$-1$ and Exhibit $14$B$-2,$ to determine the appropriate discount factor$($s$)$ using tables.

Required:

What is the purchase alternative's net present value.

What is the lease alternative's net present value.

Which alternative should the company accept?