Your favorite neighbor Poindexter learns you are pursuing an MBA and seeks your

advice on how to finance his next vehicle. He has gathered information about each

option but is not sure how to compare the alternatives. Purchasing a new vehicle will

cost $$26,500,$ and he expects to spend about $$500$ per year in maintenance costs. He

would keep the vehicle for five years and estimates that the salvage value will be

$$10,500.$ Alternatively, Poindexter could lease the same vehicle for five years at a cost

of $$5,000$ per year, including all maintenance. The lease payments are made at the

beginning of each year. Assume a discount rate of $10\%.$

$$ Provide an analysis for Poindexter at $10\%.$

$$ Provide the same analysis for good old Poindexter assuming a rate of $5\%.$

$$ At what rate will he be indifferent?