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 $18,000 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 $ 5,100 $ 3,000 $ 5,500 $ 7,500 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 $70,000 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 $15,000 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 20%. Click here to view Exhibit 14B-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? X Answer is complete but not entirely correct. 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 153.735 value EXHIBIT 14B-2 Present Value of an Annulty of $1 In Arroare; Periods 1 2 4% 0.962 1.886 2.775 3.630 4.452 5% 0.952 1.859 2.723 3.546 4.329 6% 0.943 1.833 2.673 3.465 4.212 7% 0.935 1.808 2,624 3.387 4.100 896 0.926 1783 2.577 3.312 3.993 9% 0.917 1.759 2.531 3.240 3.890 3 4 5 6 7 8 000C 5.242 6.002 6.733 7.435 8.111 5.076 5.786 6.463 7.108 7.722 4.917 5.582 6.210 6.802 7.360 4.767 5.389 5.971 6.515 7.024 4.623 5.206 5.747 6.247 6.710 4.486 5.033 5.535 5.995 6.418 9 10 11 12 13 7.499 7.943 8.358 8.745 9.108 7.139 7.536 7.904 8.244 8.559 6.805 7.161 7.487 7.786 8.061 15 8.760 8.306 7.887 9.385 8.863 8.384 9.986 9.394 8.853 10.563 9.899 9.295 11.118 10.080 9.712 10.888 10/06 12.166 11274 10.470 12.659 11.690 10.828 13.134 12.0185 11158 13.590 12.462) 11.470 10% 1195 1235 1396 15% 16% 1796 18% 19% 20% 2195 2296 2395 2496 25% 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 1736 1713 1.690 1.668 1647 1626 1.605 1.585 1.566 1.547 1.528 1.509 1.492 1.474 1.457 1.440 2487 2444 2.402 2361 2.322 2283 2.246 2.210 2.174 2140 2.106 2.074 2042 2011 1.981 1.952 3.170 3.102 3.037 2974 2914 2855 2.798 2743 2.690 2.639 2.589 2540 2494 2.448 2404 2.362 3.791 3.696 3.605 3.517 3.433 3.352 3.2743.199 3.127 3.058 2.991 2.926 2.864 2.803 2745 2.689 4.355 4.231 4.111 3.998 3.889 3.784 3.685 3.589 3.498 3.410 3.326 3.245 3.167 3.092 3.020 2.951 4.868 4712 4.564 4.423 4.288 4.160 4,039 3.922- 3.812 3.706 3.605 3.508 3.416 3.327 3.242 3.161 5.335 5.146 4.968 4799 4.6394.487 4.344 4.207 4,078 3.9543.837 3.726 3.619 3.518 3.421 3.329 5759 5.537 5.328 5.132 4.946 4.772 4 607 4.451 4.303 4.163 4.031 3.905 3.786 36733.566 3.463 6.145 5.889 5.650 5.426 5.216 5.019 4.833 - 4659 4494 -4.339492 4.054 3.92337993.682 3.571 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4.836. 4.656 4.485 4327 40353.902 376 3.656 6.814 6.492 6.194 5.918 5.660 5.421 5.197 4998 4.793 32933.9513.725 7.103 6.750 6.424 6.122 5.842 5.583 5.342 5.18 2910 4552.2090533912 3780 7.367 6.982 6.628 6.302 6.002 5.724 5.468 5.229 15.069 46807 1.611 49903.952 3.824 7.606 7.191 6.811 6.462 6.142 5.847 5.57550325.092376 40063.859 7.824 7.379 6.974 6.604 6.265 5.954 5.669 5.205 5.162 41938 4720 033 3.862 8.022 7549 7.120 6.729 6.373 6.047 5.749 5075 2.99175 3 910 8.201 7302 7.250 6.840 6.467 6.128 5.9119 5.53 5033 8.365 7.839 7.366 6.938 6.550 6.198 5.872 5.55 5. Bila 5.0704 8.514 7.963 7.469 7025 6.623 659 5.9295.62845.050 5:40 4870 8.649 8.075 7.562 7102 6.687 6.312 5.9773.516655.884 151127 3.963 8.772 8.176 7645 7170 6.7433 6259 BOR 5096 5149 461 4.488 8.883 8.266 7718 7.230 6.792 6.3996.044 -5.723 5.43251167 47034499 4137 3.976 8.985 8.348 7784 7.283 6.835 6.434 6.073 15200 5182 4937 4713 4.507 4319 9. OTT 8.422 7843 7.330 6.873. 6.464 6 097576 5461 5.195 4.948 4.721 4.514 4.323 4147 3.985 9:161 8.488 7.896 7.312 6.906 6401 6.118 5.792 5460 5.206 4 956 4728 4.520 4.328 4.151 3.988 8.547943 7.409. 6.935 6.514 6.138 5798 5.492 5.215 4.964 4.734 4.524 4.332 4.154 6.53226.152 8.602 7093 9.307 5.812 5.502 5.223 4.970 4.789 3.992 4.528 4.335 4157 6.168 6980 6.557 872 15 820 5.510 4.743 5.2294975 9370 4531 4337 4.159 3.994 5.8295.517 8.055 7256 700361566 6.177 5.235 4.979 4.746 4.534 4.339 9427594 4160 3.995 BE7894 6.642 6.233 5.871 4166 3.999 5.548 5.258 4997 4.760 4544 4.347 16 11.652 18 9,447 8.851 9.763 9:122 10.059 9.372 10.336 9/604 10.594 9.898 8.313 8.544 8.756 8.950 9.129 20 21 6 8888 GENNN8O 22 23 24. 25 14.029 14.451 14.857 115.247 15.622 12.821 13.163 13.489 13.799 14.094 11.764 12042 121303) 12.550 12783 10.886 11.062 11.272 11.169 11.654 10.017 9.292 10 201 9.442 10.371 9.580 101529 9.707 10.675 9.823 26 ZT 29 29 30 15.983 14 375 13.003 16 330 4.643 13 211 16.663 14.898 18.406 16.984 15.141 13591 17.292 15.372 13.765 11.526 10.8.10 9.929 11.987 10.935 10.02 12.137 11.051 10.116 12 278 11158 10:198 12.409 11.258 10.274 19.793 17.159 15.046 13.33311.92670757 EXHIBIT 14B-1 Presont Value of S1: (1 + r)" Periods 10% 1236 11% 0.901 1 2 3 4 5 9 10 12 15 4% 5% 6% 7% 8% 9% 13% 14% 15% 16% 17% 18% 1996 2096 0.962 0.952 21% 22% 23% 0.943 0.935 0.926 24% 25% 0.917 0.909 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 0.812 0.797 0.783 0.769 0.756 0.743 0.731 0718 0706 0.694 0.683 0.672 0.661 0.650 0.640 0.889 0.864 0.840 0.816 0.794 0.772 0751 0.731 0712 0.693 0.675 0.658 0.641 0.624 0.609 0.593 0.579 0.564 0.551 0.537 0.524 0512 0.855 0.823 0.792 0763 0.735 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 0.423 0.410 0.822 0.784 0.747 0.713 0.681 0.650 0.621 0.593 0.567 0.543 0.519 0.497 0.476 0.456 0.437 0.419 0.402 0.386 0.370 0.355 0.341 0328 0.790 0.746 0.705 0.666 0.630 0.596 0.564 0.535 0.507 0.480 0.456 0.432 0.410 0.390 0.370 0.352 0.335 0.319 0.303 0.289 0.275 0.252 0.760 0.711 0.665 0.623 0.583 0.547 0.513 0.482 0.452 0.425 0.400 0.376 0.354 0.333 0.314 0.296 0.279 0.263 0.2490235 0222 0210 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0.434 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 0.703 0.645 0.592 0.544 0.500 0.460 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 0142 0.134 0.676 0.614 0.558 0.508 0.463 0.422 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 0107 0.650 0.585 0.527 0.475 0.429 0.388 0.350 0.317 0.287 0.261 10.237 0.215. 0.195 0.178 0.162 0148 0.135 0.123 0.112 0.103 0.094 0.086 0.625 0.557 0.497 0.444 0.397 0.356 0.319 0.286 0.257 0.231 0.208 0.187 OR68 0.152 0.137 0.124 0.112 0.102 0.092 0.083 0.076 0.069 0 601 0.530 0.469 0.415 0.368 0.326 0.290 0.258 0.229 0.204 0.182 0.163 0 145 0130 016 0104 0.093 0.084 0.075 0.068 0.061 0.055 0.577 0.505 0042 0.388 0.340 0.299 0.263 0.232 0.205 0.181 0.160 0.141 0125 02111 0199 0.088 0.078 0.069 0.062 0.055 0049 0.044 0555 0.481 0.417 01362 0.315 0.275 0.239 0.209 0.183 0.160 0.140 0.123 0.103 0.095 0.084 0.074 0.065 0.057 0.051 0.045 0.040 0.035 0 584 0.458 01894 0.339 0.292 0.252 0.218 0.188 0.163 0.141 0.123 ON107 0 093 0.081 0.071 0062 0.054 0.047 0.042 0.036 0.032 0028 0 513 0.4360 371 09317 0.270 0.231 0.198 0.170 0.146 0.125 0.108 0.093 0.080 0.059 0.060 0.052 0.045 0.039 0.034 0.030 0.026 0.023 494 NO 416 01650296 0.250 0.212 0.180 0.153 0.130 0.111 0.095 0.081 0.069 0.059 0051 0.044 0.035 0.032 0.028 0.024 0.021 0.018 475 Ol8960831 0277 0.232 0.194 0.164 0.138 0.116 0.098 0.083 0.070 01060 10.05090043 0037 0.031 0.027 0.023 0.020 0.01 0.014 0456 0377 MO812 101258W/10.215 0.178 0.149 0.124 0.104 0.087 0,073 0.051 3.051 0.0430027 0:031 0:026 0022 0.019 0.016 0.014 0.012 0294 0 242 0.199 49 1859 0.164 0.135 0.093 0.077 0.064 0.053 3044 0.031 01081 0.011 0026 0.022 0.018 0,015 0.013 0.009 0.101 0226 0.150 0.123 0278 0.184 012201392 0.083 0.068 0.011 10.033 0.056 0.046 0.015 0.013 0.009 0.007 DOB20.026 0.022 0.018 01262 W211 0.170 0.138 0,406 0326 0.112 0.040 0.091 0.074 0.060 0.049 01033 0027 0.022 0:018 0.015 0012 0.010 0.009 0.007 0.006 0.013 0,247 0890 OBO 0.015 0.197 0.158 0.126 0.102 0.082 0.066 0.053 0.010 0.008 0.007 0.006 0.005 0.045 0.035 0.0290.023 0.019 0.116 0.092 0.074 10075 0.059 04184 0.146 W205 BO O ORO 01 016 0024 0047 0.013 0.038 0.030 0.010 0.009 0.007 0.006 0.005 0.004 0.033 D1021 01026 0.135 0.084 0.066 0.053 0.042 10.017 0.011 0106 0.009 0.007 0.006 0.005 0.004 0.003 0.034 0220 0.172 0106 0028 0.031 01018 0.029 0.023 2014 0.009 0.007 0.006 0.005 0.004 0.003 0.002 0.060 0047 OBT 0.125 0151 01288 0.098 0.076 0.207 0016 0.012 0.054 0.042 0.010 0.033 0.025 0.020 0850 0196 0.008 0.006 0.005 0.004 0.003 0.002 0.002 01116 0383 0.265 0.090 0.069 0.014 10.017 0.037 0063 0185 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002 0.011 0.029 0.048 OND ON141 0.022 0.082 0.1107 TO240 0.015 0.012 0026 0.020 0.044 0.033 0.0090.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 10.099 0174 10.308 WOW 0.075 0.057 0.001 0.001 0.000 0.000 0.000 0.000 0.000 0.003 0.002 0.001 01022 on22 0.015 0.008 0.005 0.004 0.046 10.09.067 0.911 0208: 09142 16 17 67eae "PEEEEE 0.112 22 24 21 20 29 00 OGI 40 11 ENG