You have 2 options for financing the of a car. The buy option will cost you $30,200 today and $15,000 in 4 years from today. Alternatively, you could lease the car for monthly payments (end of the month) of $889.00 over 4 years. Further, if you buy the car, there will be a residual value (scrap value) received of $8,000 when you are done with the car in 4 years. If interest is 5% compounded annually, which financing option is cheaper using Discounted Cash Flows? (4 marks)

1a) What is the cost of buying the car (DCF in todays dollars).

1b) What is the cost of leasing the car. (DCF in todays dollars)

1c) Which is cheaper?