4. Williams has a choice of purchasing a car for $40,000 with 5% interest cost...
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4. Williams has a choice of purchasing a car for $40,000 with 5% interest cost to borrow and a three-year repayment period for leasing the vehicle. Leasing the auto would cost a 500 a month for a three-year term. The sales tax is 6 percent. The car is expected to have a value of $20000 at the end of the leasing period. Williams can obtain 7 percent after tax on similar marketable investments.
Should he lease or buy the car?
Please use both NPV and IRR methods. (Use timeline starting at 0.) What is the general rule for car buy or lease?
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