You have decided you need a truck in your business. You are looking at a Ford Ranger. You have got some quotes for both leasing and purchasing a vehicle from Broadway Ford. The information is given below. Your after-tax cost of capital is 7%. The tax rate is 30%. A pickup is considered a 5-year property. What are the NPVs for the two alternatives? Which would you choose and why?

Purchase

Cost: $24,490 with tax and title

Down: 0%

Finance rate: 6.99 % per year

Payments: 3

Salvage value: $9,660

Lease

Lease payments $4,319 per year for 3 years.