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The Wrongway Ad Agency provides cars for its sales staft. In the past, the company has always purchased its cars from a dealer and then

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The Wrongway Ad Agency provides cars for its sales staft. In the past, the company has always purchased its cars from a dealer and then sold the cars affer 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 as follows: Purchase Arernative. 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 $23,800 each if this alternative is accepted, the following costs will be incurred on the fleet as a whole: At the end of three years, the flect could be sold for one-half of the original purchase price Lease Aliernatve. The company can leare the cars under a three year lease contract. The lease cost would be $75,500 per year (with 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. Wongway would be required to make a $27,500 secuily deposit at the beginning of the lease petiod, which would be refunded when the cars were returned to the owner at the end of the lease controct. Whongway's required rate of retum is 18%. factorst usina tables. Wrongway's required rate of retum is 18%. Click here to view Exhibit 10-1 and Exhibit 10-2, to determine the appropriate discount factor(s) using tables. 1. Use the total cost approach to determine the present value of the cash flows associated with each alternative. (Negative amounts should be indicated with a minus sign. Round discount factor(s) to 3 decimal places. Round other intermedlate calculations and final answers to the nearest whole dollar amounts, 2 Which alternative should the company accept based on the calculations in port (1)? Puichase of fleet Lease of cars

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