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 $31,000 each. If this alternative is accepted, the following costs will be incurred on the fleet as a wholet Annual cont of servicing, taxes, and licensing $ 4,700 Repairs, first year $ 2,600 Repairs, second year $ 5,100 Repairs, third year $ 7,100 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 coat would be $66,000 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 $13,000 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 16% Click here to view Exhibit 148 1 and Exhibit 148.2. 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? BIT 1411-1 nt Value of $1,1 (+) ods 56 2 4 5 6 7 8 6 TO 11 SSID 13 14 15 16 45 5% 69 79 89 105 115 125 139 149 154 16% 175 18 195 2015 215 225 235 345 255 0.9620952 0943 0.935 0.926 09171 0909 0.901 0.893 OSRS 0.877 0.8700 862 0.855 0.847 0.84008330X26082008030 806 0.800 0.925 0907 0.90 0.873 0.8570.8420826 0.812 0.797 0.783 0.769 0.756 0.743 0731 0.7180.70606940.683 0.672 0661 0.650 0.640 0.8890.86 0.8.40 0.816 0.794 0.772 0.751 0.731 0712 0.693 0.675 0.6580641 06240 6090.593 0.579 0.5640551 0.53705240.512 08550823 0.792 0.763 0.735 0.7080683 06590636061305920 5720552 05340 516 0.499 0452 0.467 0.451 0437 0421 0.410 0.822 | 0.784 07470 713 10.681 0.6500 621 0 593 0.567 0.5430519049704760456 0437 0.419 0.402 0.385 03200155 0.31 0.12 0.790 0.746 0.705 0.6660.6300 5960 566 05150 507 0.48004560432 0.410 030 0.370 035203150 3190.000 2890.275 0.262 0.700 0.7110.665 0.6230 S 0.5470513048204520425 0.4000376 0.354 0.333 03140.2960.279 0.263 0.2490.2350 222 0.210 0.731 0.677 0627 0.5820.540 0 502 046704440404 03760351 0.327 0.305 02650 2660 2490 2130 218 0.2040191 0.179 0.168 0.70306450.5920 54405000 4600424 0.391 0.361 0313 0.30 0.2840.263 0243 0.2250 2090.194O.INO 0.167 0.155 0.144 0.114 067606140558 OSOB 0.463042203860352 0.322 0.295 0.270 0247 0.2270208 0.1910.176 0.162 0.149 0.137 0.126 0.116 0 107 0.650055052704750429 0.3880 350 0317 0.2870.261 0.23702150 195 0.17 0.162 0.148 0.1350 123 0.112 0.10300940086 0.62505570 49704440397 0156 0.3190 2860257 0231 0.208 0.187 0.168 0.152 0.1370 1240.1120 1020.092 OOR30076 0.069 0.001 0530 0.4690415 0.7680.326 0.290 0.2580229 0.2040.182 0.163 0.145 0.100.116 0.104 0.093 0084 0.075 0.06 0.061 0 5770 SOS0.442 0 380 3400 2990 263 0.2320 2050.1810.160.141 0.125 0.111 0.0% OR 0.0780069 0.0620055 0.049 0.044 0.55504810417020315027502390 209 0.183 01600.1400.123 0108 0.0950084 00740065 0057 005 004 0.0400035 0.534 0458 0394 0.3390 292 0252 0210.1880.160.141 0.123 107 0.093 DONT 0071006200540047 00420036 0.032 0.029 0.51304160371 03170.2200 201 0.19 0.170 0 146 0.125 0.1080093 OOO 0069 0.000 0.0320045 00390014 0.03000260023 0.4940416 0.250 0.1960.250 0.2120.1800.153 0.13 0.11 0.095 ODRI 006900590051 0044 0038 0032 0.025 0.024 0.021 00 0.475 0.1960.331 0.277 0212 0.1940.1640138 0.116 0098 0.03 007000600.05100410037 0011 0027 001 0.02000170014 0,456 0.37703120.258 0.2150.1780 1490 1240 1040057007) 00610051 0.04300370031 0.026 0022 0.019 0.016 0014 0012 0.439 0 159 0.294 0 242 0.1990.1640.1350 112 0.093 0.077 0.064 OO 0044 0017003100260022 OOI001500100110.000 0.42203420272260.1140 150 0.1200.101008 0.060056 0046 0038020026 0.0220018 001500100110000007 0.40603260 2620 211 01700 1300112 0.09100740D500049 0010001300270022 ODIN 0015 0.01200100009 0.007 006 0103100247 0.1970 1580 1260102 0.02 0.066005300143 00150028 0.02300190DIS 0000100 DOO 007 0006 0.005 0.375 0.295 0.23301840146 0.116 0.092 007400590047 003 0.030002400N 000 ODOS 000 0.361 0281 0.220 0.172 0.135 0.10% ODR4 0066 0053 0.020011002600210011001100 0.007 0.005 0.005 ODO 0.2680 207 0.161 0.125 0.098 0076 00004700370029 0.023001800140 000 0007 000 0005 004 0 113 0.255 0.1960 1900116 00006900560042 0031 0,0260 02000160012 0000060005 0.0040003 O 002 0.002 0.321 0.3410185 0.141 0.107 00820063 006 0007 002900220012001400110 0.00 0.00 0.002 0.002 0.002 0.231 011740131 0099 0.035 0.057 00440033 0026002000150012000900070005 0000 000 0001 0.002 O DOZ 0.200.1420609200620046 0032 00220015 0.0050004 0.003 00020001 0.0000000000 000000000000 000D , LI INTO OSTO 18 19 1 OL 9000 LOTO 60001001000 21 22 23 24 25 26 27 28 29 30 COD 2000 000 CICO SODO MIO 1000 WOLO WOOD T100 OT nt Value of an Annuity of S1 in Arrears, Itil.1(1+) SET 581 ods 1861 1 2 3 4 5 IESZ EO 9 7 RISE X ILSE 6 SEE EISE SRE E ZON I 10 11 12 13 144 15 15 12 IR 19 20 21 22 21 24 25 26 27 49 55 69 79 89 95 10 115 125 135 149 155 165 175 195 205 215 224 24 255 096209520943 0.9350 926 0917 0.90909010893OS10x7705700862 0.855084708000.8330.826 0.820 0.813 006 O.NO 1886 1859 18331 SON 1783 1759 1.7361.713 1.690 1663 1647 1626 1.6051585 1.566 1847 1.528 1.5091492 1.4741457 1.440 2.7752.723 2.673 2.624 2.577 24872 446 2.40223612322 223 2246 2210 2174 2.140 2.106 20742042 2011 1952 3.630 1546 3.4653387 3312 3.240 3.1703.102 3037297429142355 2.798 2.743 2.690 26392589 2.540 2.494 2.448 2.404 2362 4452 4329 42124 100 3.993 3.890 3.791 3 696 3.605 3.517 3433335232743.1993.127 3058 2.991292628642.803 2745269 5242 5076 49174.76746214.48643554231 4.111 3.9983.889 3.7843.685 3.589 3.498 3410 3.326 3.245 3.167 3.092 3020 2.951 6.0025.786 5525.389 5.20650334868471245644423 42684.1604039 3.922 3812 3.706 3.6053SON 3416 3.327 3.2423.161 6.733 6.461 6.210597157475535 53355 1464968479946394487 4344 4.207 4078 3.954 3837 3.7263619 3518 3421 3.329 74157.1086 802 6 515 6.2475.9955.7595.537 53285.132494647724607 4451 4.303 4.161 40813.905 3.786 367335663.463 8.1117.722 716070346.710 6 418 6.145 5.889 5650542652165019 4833 4659 4.494 43394 192 405439233.79936823.571 8.7608306788274997 1996 NOS 6.49562075935568754535 234 5.0294.8364656448643274 1774.035 3.9023.7763.656 9.38538638347.943 7.5367.161 | 6814 6.4926.1945 9185660 5421 5197 49884.793 46114439 4278 4.127 3985 9.9869194 88538358790474877103 6.7506424 6.122 58425583 5.342 5.118 4910 47151 4.5334362 4.203 405339123.780 103639.99 9.2958745 244 778673676 982 6.628 6.302 6.0025.7245 468 5229 SOON 46114432 4.265 4.108 392 3824 11 11 10.30 9.7129 108 8559 8061760617191 6811 6462 6.142 584755755.324 5.092 4.676 467544894315415340013859 11652 10.838101069447 8.251831378273796.974 66046.26559545 6685 405 5.16249384.730 4.53641574.18940133887 12.166 11 274 10.4779 763 9.122 8.54402275497.120 67296.373 6.047 57495475 5.223 4 990 4.775 4576 4 391 4219 4059 3.910 12 659 11601028100599372 8.756.20127027250684064676.1285R1855352735033 4812460844194 243 4.083.928 1314412 DRS 15 10 3369604 8950 83657839716669386 5506.1985877 558433165 0704841461544424.263 4,097 1942 13.50 12 462 11470 10.5949818 9.129351479637 4697025 6.623 6.25939295.628 53535.10148704657446042794.1101954 140201282111 764 10 16 10.01719 292 861907575627.102 63125973566553845.1274 914675447642924.121 3.963 1445113.1631204211 061 10.201944287728.1767645 7.1706143639960115 696 5410 5.149 4909 4.6790 44884 M2 4.1303970 14:57 13.489 12.30311 272 10371 9.580 88.2667.71872306.7926.19960445 7235412 5.167 4.925 4.701449933114137 1976 15 247 13.79912 550 1147 10.529970797784723683564146.073574654515.182 4937471345074318 4.141391 1562214094 127111654 10 6759821 9077842278437306.873646660975.76654675.1954948472143144323414705 159141251300011 N26 10 10 99209.161N4S 789673726606 64016 ITN 378054NO3206 4936 1988 16 30 147643121111987109351002792177943740969156 514 6.1365.795492521549644 1990 16.6614.9813406 12.137 11OS101169.102 8602795474416.96165146 15238105.502221499047) 992 T6 15.14113591 12.27811158 10.1989.170 8650802274706 9636 556.166 SR205310522949754743 0911 17.292 15.372 13.76512400 1125 1027494279 ROSS7496700364666.177582955125.23549794746 19.709 07.19919046 D33211925 10.7579.72939512442014210566126233 55.54832584.997 4 700 199 4X99 VE 9L Son 29 MO 40