Solutions to Chapter 1

Using a financial calculator, enter: PMT = 8,000, n = 6, i = 7%, FV = 0, and compute PV = $38,132.32. Since $38,132.32 < $40,000 (the cost of buying a truck), it is less expensive to lease than to buy. PV of an annuity due = PV of ordinary annuity ( (1 + r) (See problem 27 for a discussion of the value of an ordinary annuity versus an annuity due.) ................
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