Suppose that you buy a new car, and you purchase it with a bag of gold coins minted in a foreign country. Which of the following

Answer:

a. What is the initial investment at t=0?

• -$90,000

b. What is the Cash Flow at year 1?

• $33,950

c. What is the Cash Flow at year 3?

• $40,270

d. What is NPV?

• $1,788.50

Explanation:

Initial investment amounts to $90,000

Annual depreciation calculated using straight-line depreciation method = $90,000 / 3 = $30,000

Year 1 cash flow = [($40,000 - $5,000 - $30,000) × 0.79] + $30,000 = $33,950

Year 2 cash flow = [($45,000 - $6,000 - $30,000) × 0.79] + $30,000 = $37,110

Year 3 cash flow = [($50,000 - $7,000 - $30,000) × 0.79] + $30,000 = $40,270

Using an Excel spreadsheet, I calculated the NPV = $1,788.50

Answer:

The estimated monthly payment amounts to $383

Explanation:

In this case, we aim to determine the estimated monthly payment for a lease of 3 years, and the question outlines the steps involved.

To start, we take the MSRP and deduct the residual value of 48%

Calculating 48% of $26,500 gives us 48/100 * 26,500 = $12,720

We then subtract this value from $26,500

This results in $26,500 - $12,720 = $13,780

With a duration of 3 years, that translates to 36 months

Thus, the estimated monthly payment can be calculated as;

$13,780 / 36 = 382.7777777777778 which rounds to approximately $383