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 $28,000 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 $ 4,400 $ 2,300 $ 4,800 $ 6,800 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 $63,880 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 $11,500 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 16%. Click here to view Exhibit 12B-1 and Exhibit 12B-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? 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? (Round your final answer to the nearest whole dollar amount. Enter negative amount with a minus sign.) Net present value EXHIBIT 128-1 Present Value of $1:a + 23% Periods 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 24% 25% 1 0.962 0952 0943 0935 0.926 0917 0909 0.901 0893 0.885 0.877 0870 0862 0855 0.847 0.840 0.833 0.826 0.820 0813 0806 0.800 2 0.925 0907 0890 0.873 0857 0842 0826 0812 0797 0783 0769 0756 0743 0731 0.718 0706 0694 0683 0672 0661 0650 0640 3 0.889 0.864 0 840 0816 0.794 0772 0.751 0731 0712 0693 0675 0658 0641 0624 06090593 0.579 0564 0551 0.537 0.524 0512 4 0.855 0.823 0792 0763 0.735 0708 0683 0659 0636 0613 0592 0572 0552 0534 0516 0499 0.482 0.467 0.451 0.437 0423 0.410 5 0.822 0784 0747 0.713 0681 0650 0621 0593 0.567 0.543 0519 0497 0476 0.456 0.437 0.419 0402 0386 0.370 0355 0341 0328 6 0790 0746 0705 0666 0630 0.596 0564 0535 0507 0.480 0456 0432 04100390 0.370 0352 0335 0319 0303 0289 0.275 0262 7 0.760 0.711 0665 0.623 0.583 0547 05130482 0452 0425 0400 0376 0354 0333 0314 0.296 0.279 0263 0.249 0235 0222 0210 8 0.731 0.677 0.627 0.582 0.540 0.502 0.467 0434 0.404 0.376 0351 0327 0305 0.285 0.266 0.249 0.233 0.218 0204 0.191 0.179 0.168 9 07030645 0592 0.544 0.500 0.460 0.424 0391 0.361 0333 0308 0284 0.263 0243 0.225 0.209 0194 0180 01670155 0144 0134 10 0.676 0.614 0.558 0.508 0.463 0.422 0.386 0352 0322 0295 0.270 0247 0.227 0.208 0.191 0176 0162 0.149 0137 0126 0116 0107 11 0.650 0.585 0527 0475 0429 0388 0350 0317 0287 0261 0237 0215 0195 0178 0162 0148 0135 0123 0112 0103 0.094 0086 12 0.625 0.557 0497 0.444 0.397 0.356 0319 0286 0.257 0.231 0208 0.187 0.168 0.152 0.1370124 0112 0.102 0.092 0.083 0.076 0.069 13 0.601 0530 0469 0415 0.368 0.326 0.290 0258 0229 0204 0182 0163 0145 0.1300116 0104 0093 0.084 0.075 0.068 0.061 0.055 14 0.577 0.505 0.442 0.388 0.340 0.299 0263 0.232 0205 0.181 0.160 0141 0.125 0111 0.099 0.088 0.078 0.069 0.062 0055 0.049 0.044 15 0.555 0481 0417 0.362 0.315 0.275 0.239 0209 0.183 016001400123 0108 0.095 0.084 0.074 0.065 0057 0.051 0.045 0040 0.035 16 0.534 0.458 0394 0339 0.292 0252 0218 0.188 0.163 0.141 0123 0.107 0.093 0.081 0.071 0.062 0.054 0.047 0.042 0.036 0.032 0.028 17 0.513 0.436 0371 0.317 0.270 0.231 0198 0170 0.146 0.125 0108 0.093 0.080 0.069 0060 0,052 0.045 0.039 0.034 0030 0.026 0.023 18 0.494 0.416 0350 0.296 0.250 0212 01800153 0130 0111 0.095 0081 0069 0.059 0.051 0044 0038 0.032 0.028 0.024 0.021 0.018 19 0.475 0.396 0331 0277 0232 0194 0.164 0138 0.116 0.098 0.083 0.070 0.060 0.051 0043 0.037 0.031 0.027 0.023 0.020 0.017 0.014 20 0.456 0377 0312 0258 02150178 0149 0124 0104 0087 0073 0061 0051 0043 0037 0031 0026 0.022 0.019 0.016 0014 0012 21 0.439 0359 0294 0242 0.199 0164 0135 0112 0093 0.077 0.064 0053 0.044 0037 0031 0.026 0.022 0.018 0015 0.013 0.011 0.009 22 0.422 0342 0.278 0226 0184 0150 0123 0101 0083 0068 0056 0.046 0038 0.032 0.026 0022 0018 0.015 0.013 0011 0009 0.007 23 0406 0326 0262 0211 01700138 0112 0091 0.074 0.060 0049 0040 0033 0027 0022 0.018 0015 0012 0.010 0009 0007 0006 24 0.390 0310 0247 0197 0158 0126 0102 0082 0066 0053 0043 0035 0028 0023 0019 0015 0013 0.010 0.008 0.007 0006 0005 25 0.375 0295 0 233 0184 0146 0116 0092 0074 0059 0047 0038 0030 0024 0020 0.016 0.03 0.010 0.009 0.007 0.006 0.005 0.004 26 0.361 0281 0220 0172 0.135 0106 0.084 0066 0.053 0042 0033 0026 0.021 0.017 0.014 0.011 0.009 0.007 0.006 0.005 0.004 0.003 27 0.347 0268 0207 0161 0125 0098 0076 0060 0047 0037 0029 0023 0018 0014 0011 0009 0007 0006 0005 0.004 0003 0002 28 0.333 0255 0196 0150 0116 0090 0069 0054 0042 0033 0026 0020 0016 0012 0010 0.008 0.006 0.005 0004 0.003 0.002 0002 29 0321 0243 0185 0.141 0107 0082 0063 0048 0037 0029 0022 0017 0.014 0.01 0.008 0.006 0.005 0.004 0.003 0.002 0.002 0.002 30 0.308 0.231 0.174 0.131 0.099 0.075 0.057 0044 0.033 0.026 0020 0.015 0.012 0.009 0.007 0.005 0.004 0.003 0.003 0.002 0.002 0.001 40 0,208 0.142 0.097 0.067 0.046 0.032 0.022 0.015 0.011 0.008 0.005 0004 0.003 0.002 0.001 0.001 0.001 0.000 0.000 0.000 0.000 0.000 EXHIBIT 128-2 Present Value of an Annuity of S1 in Arrears: (+) 9% 24% Periods 4% 5% 6% 7% 8% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% 21% 22% 23% 25% 1 0.962 0.952 0943 0.9350 926 0.917 0909 0 901 0893 0885 0877 0870 0862 0855 0.847 0.840 0.833 0.826 0.820 0.83 0.806 0.800 2 1886 1859 1833 1808 1.783 1759 1736 1713 1.690 1668 1647 1626 1605 1.585 1566 1547 1528 1509 1492 1474 1457 1440 3 2.775 2.723 2673 2624 2.577 2531 2487 2444 2402 2361 2322 2283 2246 2210 2174 2.140 2.106 2074 2042 2011 1.981 1952 4 3.630 3.546 3.465 3.387 3.312 3.240 31703102 3.037 2.974 2.914 2.855 2798 2743 2690 2.639 2.589 2.540 2494 2.448 2404 2.362 5 4452 4329 4212 4.100 3.993 3.890 3791 3696 3.605 3517 3433 3352 3.274 3199 3127 3058 2991 2926 2864 2803 2745 2689 6 5.242 5.076 4.917 4.767 4.623 4486 4.355 4231 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 2951 7 6.002 5786 5.582 5389 5.206 5.033 4.868 4712 4564 4.423 4288 4160 4.039 3.922 3.812 37063605 3.508 3.416 3.327 3.242 3161 8 6.733 6 463 6.210 5.971 5.747 5,535 5335 5.146 4.968 4799 4.639 4.487 4344 4.207 4.078 3.954 3.837 3.726 3.619 3.518 3.421 3.329 9 7.435 7108 6.802 6.515 6.247 5.995 5759 5537 5328 5132 4946 4772 4607 4451 4303 4163 4031 3.905 3786 3.673 3.566 3.463 10 8.111 7722 7360 7024 6710 6.418 6145 5889 5650 5.426 5216 5019 4833 4659 4494 4339 4192 4.054 3923 3.799 3.682 3571 11 8760 8.306 7887 7499 7139 6.805 6.495 6.207 5.938 5.687 5.453 5.234 5.029 4836 4656 4 486 4.327 4177 4.035 3.902 3.776 3.656 12 93858.863 8.384 7943 7536 7161 6.814 6.492 6.194 5918 5660 5.421 5197 4.988 4793 4611 4.439 4278 4127 3.985 3851 3725 13 9.986 9.394 8.853 8.358 7904 7487 7103 6.750 6.424 6.122 5.842 5.583 5.342 5.118 4910 4715 4533 4.362 4203 4.053 3.912 3.780 14 10.563 9899 9 295 8.745 8.244 7786 7367 6.982 6.628 6.302 6.002 5724 5.468 5229 5.008 4802 4611 4432 4.265 4108 3.962 3.824 15 11118 10.3809712 9108 8.559 8061 7606 7191 6.811 6.462 6142 5.847 5.575 5 324 5.092 4.876 4675 4.489 4.315 4.153 4.001 3.859 16 11.652 10.838 10.106 9.447 8.851 8.313 7824 7379 6.974 6.604 6.265 5.954 5.668 5.405 5,162 4.938 4730 4.536 4.357 4.189 4.033 3.887 17 12 166 11274 10.477 9763 9122 8.544 8022 7549 7120 6729 6.373 6047 5749 5.475 5222 4990 4775 4576 4391 4219 4059 3.910 18 12.659 11.690 10.828 10.059 9.372 8.756 8.201 7702 7250 6.840 6.467 6128 5.818 5.534 5.273 5.033 4.812 4.608 4.419 4243 4.080 3.928 19 13 134 12.085 11.158 10.336 9.604 8950 8365 7839 7366 6.938 6.550 6198 5877 5584 5.316 5070 4.843 4635 4442 4263 4,097 3.942 20 13.590 12.462 11.470 10.594 9.818 9.129 8.514 7963 7.469 7025 6.623 6.259 5.929 5.628 5.353 5101 4.870 4657 4.460 4.279 4.110 3.954 21 14.029 12.821 11764 10.836 10.017 9.292 8.649 8.075 7.562 7102 6.687 6.312 5.973 5.665 5.384 5.127 4.891 4.675 4.476 4.292 4.121 3.963 22 14.451 13163 12.042 11061 10 201 9.442 8.772 8176 7645 7170 6743 6.359 6.011 5.696 5410 5149 4909 4690 4488 4302 4130 3970 23 14.857 13.489 12 303 11.272 10.371 9.580 8883 8266 7718 7230 6.792 6.399 6.044 5.723 5.432 5.167 4925 4703 4499 4.311 4.137 3.976 24 15.247 13.79912 550 11.469 10.529 9707 8 985 8348 7784 7283 6.835 6.434 6073 5746 5.451 5.182 4937 4.713 4.507 4.318 4143 3.981 15.622 14.094 12.783 11.654 10.675 9.823 9.077 8.422 7843 7330 6.873 6.464 6.097 5.766 5.467 5.1954.948 4.721 4514 4.323 4.147 3.985 26 15.983 14.375 13.003 11.826 10.810 9.929 9.161 8.488 7.896 7372 6.906 6.491 6.118 5.783 5.480 5.206 4.956 4.728 4520 4328 4.151 3.988 27 16 330 14.643 13.211 11.987 10.935 10.027 9.237 8.548 7943 7409 6.935 6.514 6136 5798 5.492 5 215 4964 4734 4524 4332 4154 3.990 28 16.663 14.898 13.406 12.137 11.051 10.116 9.307 8.602 7984 7441 6.961 6.534 6.152 5.810 5.502 5.223 4.970 4.739 4.528 4.335 4157 3.992 29 16.984 15141 13.591 12.278 11.158 10198 9370 8.650 8.022 7470 6.983 6.551 6166 5.820 5.510 5229 4.975 4.743 4.531 4.337 4.159 3.994 30 17.292 15 372 13.765 12.409 11.258 10.274 9.427 8.694 8.055 7496 7003 6.566 6.177 5.829 5.517 5.235 4.9794746 4.534 43394.160 3.995 40 19.793 17159 15.046 13.332 11.925 10.757 9.779 8.951 8.244 7634 7105 6.642 6.233 5.871 5.548 5.258 4.997 4.760 4544 4347 4.166 3.999 25