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Analyse the cost of purchasing a car versus leasing a car over a four-year period...

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Finance

Analyse the cost of purchasing a car versus leasing a car over a four-year period

The following assumptions are made:

Cost of the Car = $ 50,000

Life (n )= 4 Years

Salvage Value (pre-tax) = $ 10,000

Depreciation Cost (Straight Line to Zero ) = $ 12,500 Per Year Considering Straight Line to Zero

Annual maintenance cost = $ 5,000 Per Year

Annual Lease fee (Pre-tax)= $ 12,000 Per Year payable at the beginning of the year

Required Return (r )= 15%

Tax Rate = 35%

Calculate the NAL of the project

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