The wrongly Ad agency provides cars for its sales staff. In the past, the company has always purchased its cars from the dealer and then sold the cars are 3 years of use.

The Wrongway Ad Agency provides cars for its sales staff . In the past , the company has always purchasedit's cars from a dealer and then sold the cars after three years of use . The company's present fleet of cars isthree years old and will be sold very shortly . To provide a replacement fleet , the company is considering twoalternatives as follows :`Purchase Alternative . The company can purchase the cars , as in the past , and sell the cars after threeyears of use . Ten cars will be needed , which can be purchased at a discounted price of $20, 000 each . Ifthis alternative is accepted , the following costs will be incurred on the fleet as a whole*Annual cost of servicing , taxes , and licensing$5, 250Repairs , year !2, 200Repairs , year 24,800Repairs , year 36,900At 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 costwould be $65, 750 per year ( with the first payment due at the end of year ! ) . As part of this lease cost ,the owner would provide all servicing and repairs , license the cars , and pay all the taxes . Wrongwaywould be required to make a $ 12, 250 security deposit at the beginning of the lease period , which wouldbe refunded when the cars were returned to the owner at the end of the lease contract .Wrongway's required rate of return is 18%/.Click here to view Exhibit 10 - 1 and Exhibit 10 - 2, to determine the appropriate discount factor ('s ) using*tables .Required :`( Ignore income taxes . !"1 . Use the total cost approach to determine the present value of the cash flows associated with eachalternative . ( Negative amounts should be indicated with a minus sign . Round discount factor ( s ) to3. decimal places . Round other intermediate calculations and final answers to the nearest wholedollar amounts . !Present Value ofCash FlowsPurchase of fleetLEASE Of cars