Answered step by step
Verified Expert Solution
Question
1 Approved Answer
You are considering buying a new top of the line luxury car. The cars list price is $99,000. The dealer has offered you two alternatives
You are considering buying a new top of the line luxury car. The cars list price is $99,000. The dealer has offered you two alternatives for purchasing the car:
- You can buy the car for $90,000 and get a $9,000 discount in the bargain.
- You can buy the car for the list price of $99,000. In this case, the dealer is willing to take $39,000 as an initial payment. The remainder of $60,000 is a zero interest loan to be paid back in equal installments over 36 months.
Alternatively, your local bank is willing to give you a car loan at an annual interest rate of 10% compounded monthly (that is 10%/12 per month).
Decide how to finance the car: Bank loan or zero interest loan with the dealer, or cash payment.
Please show Excel formulas.
P
A F G H 1 w N 2 Cost of car 3 Cash discount 4 Cash cost after discount 5 credit cost 6 Bank loan, monthly 7 EAIR, bank 8 IRR, monthly 9 of cash minus zero % 10 EAIR, dealer 11 B D E BUYING A LUXURY CAR 99,000 Option 2 9,000 Rate 90,000 #NAME? Cash 0 Financed #NAME? Periods #NAME? Monthly Payment Present Value 0% 39000 60000 36 ($1,666.67) $99,000.00 99000 10% 120 ($9,900.11) 99000 #NAME? #NAME? Zero % loan Cash 12 13 PV of alternative 14 Zero% loan Cash minus "zero%" loan Cash 15 Period 16 17 0 #NAME? 1 18 2 19 3 20 4 5 21 22 23 6 7 24 8 25 9 26 10 11 27 28 12 13 29 30 14 31 15Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started