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Leasing the car
Down payment	{A}	$5,000.00
Interest (compounded annually)	{B}	5.50%
List Price	{C}	$23,600.00
Additional purchase costs	{D}	$1,637.00
Term in months	{F}	60
Monthly payments (without HST)	{G}	$240.00
		(beginning-of-month payments)
Residual (FV) payment to own	{H}	$12,300.00
Financing the car
Down payment	{A}	$5,000.00
Interest (compounded annually)	{B}	5.50%
List Price	{C}	$23,600.00
Additional purchase costs	{E}	$1,883.00
Term in months	{F}	60

a. A salesperson at the car dealership gave Amandeep the following table illustrating the comparison of the lease vs. finance options for the vehicle he liked.

b.Draw a detailed timeline for the lease option. Be sure to include the residual value (with HST) at the end of the last payment interval, the net price, and the after-tax payments at equal payment intervals.

c.Which option would be most economical for Amandeep? Show all calculations and provided a detailed explanation with your answer. Hint: Compare NPVs

d.What should the residual payment be (including taxes) in order to make both options equal?

e.Which option would be most economical if the residual value was $20,000 (including HST) for the lease option?

	Leasing the car	Financing the car
Down Payment	$5,000.00	$5,000.00
Interest Rate (compounded annually)	5.50%	5.50%
List Price		$23,600.00
Additional purchase costs		$1,883.00
13% HST		[applied to additional purchase costs and list price]
Net Price
Term in months	60	60
Monthly payments	[BGN] * add HST $240.00+$240.00*13%=$271.20	[END]
Residual (FV) payment to own	* add HST

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