The Riteway Ad Agency provides cars for its sales start 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 feet, 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 317,000 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 $3,300 $ 1,200 $ 3,700 5 5.700 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 three year lente contract. The lease cost would be $52,000 per year the first payment du 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 mitewny would be required to make a $11,100 security deposit at the beginning of the lente period, which would be refunded when the care were returned to the owner at the end of the lease contract. Riteway Ad Agency's required rate of return is 17% Click here to view Ext 1.128.1 and Ext. 128-2. to determine the appropriate discount tactors 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 alternate should the company accept? Complete this question by entering your answers in the tabs trelow. Required Labeau Products, Ltd. of Perth, Australia, has $11,000 to invest. The company is trying to decide between two alternative uses for the funds as follows Invest in Invest in Project X Project Investment required $11,000 $ 11,000 Annual cash inflows $ 4,000 Single cash inflow at the end of 6 years $ 25,000 Life of the project 6 years 6 year's The company's discount rate is 15% Click here to view Exhibit.128.1 and Exhibit: 1282. to determine the appropriate discount factor(s) using tables Required: 1. Compute the net present value of Project X 2. Compute the net present value of Project Y 3. Which project would you recommend the company accept? Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Compute the net present value of Project X. (Hegative amount should be indicated by a minus sign. Round your final answer to the nearest while dollar amount.) Net present value Required 2 >
