You own a cab company and are evaluating two options to replace your fleet. Either you can take out afive-year lease on the replacement cabs for $500 per month percab, or you can purchase the cabs outright for $30,000, in which case the cabs will last eight years. You must return the cabs to the leasing company at the end of the lease. The leasing company is responsible for all maintenancecosts, but if you purchase thecabs, you will buy a maintenance contract that will cost $100 per month for the life of each cab. Each cab will generate revenues of $1,000 per month. Assume the cost of capital is fixed at 12.0%. (Hint: Make sure to round all intermediate calculations to at least four decimal places.)

a. Calculate the NPV per cab of bothpossibilities: purchasing the cabs or leasing them.

The NPV of leasing the cabs is $____ per cab.(Round to the nearestdollar.)

The NPV of buying the cabs is $_____per cab. (Round to the nearestdollar.)

b. Calculate the equivalent monthly benefit of both opportunities.

The equivalent monthly benefit of leasing is $ _____per cab. (Round to the nearestdollar.)

The equivalent monthly benefit of buying is $___per cab.(Round to the nearestdollar.)

c. If you are leasing acab, you have the opportunity to buy the used cab after five years. Assume that in five years afive-year-old cab will cost either $10,000 or $16,000, with equallikelihood; will have maintenance costs of $500 permonth; and will last three more years. Which option should youtake?

If you buy the cabs in 5years, the NPV of leasing the cabs is $_____ per cab.(Round to the nearestdollar.)

Therefor, you (should buy or lease )the cabs.(Select from thedrop-down menu.)