After deciding to buy a new car, you can either lease the car or purchase it on a two-year loan. The car you wish to buy costs $38,500. The dealer has a special leasing arrangement where you pay $106 today and $506 per month for the next two years. If you purchase the car, you will pay it off in monthly payments over the next two years at an APR of 7 percent. You believe you will be able to sell the car for $26,500 in two years.
What break-even resale price in two years would make you indifferent between buying and leasing? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
Break-even sale price $
What is the present value of purchasing the car? (Do not round intermediate calculations and round your final answer to 2 decimal places, e.g., 32.16.)
Present value $