Your Firm Needs to Invest in a New Delivery Truck

question 14

Multiple Choice

Your firm needs to invest in a new delivery truck. The life expectancy of the delivery truck is five years. You can purchase a new delivery truck for an upfront cost of $300,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $6000 (paid at the end of each month) . Your firm can borrow at 8.00% APR with quarterly compounding. The monthly discount rate that you should use to evaluate the truck lease is closest to ________.

• A) 0.5298%
• B) 0.7947%
• C) 0.6623%
• D) 0.6667%

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Definitions:

Price

The amount of money expected, required, or given in payment for something, often determined by the conditions of demand and supply.

Price Elasticity

A measure of how much the quantity demanded of a good responds to a change in its price, indicating the sensitivity of consumers to price changes.

Knee Braces

Supportive devices worn to protect or assist the knees, often used after injuries or for preventive measures in sports.

Perfectly Elastic

describes a situation where a small change in price results in an infinite amount of change in the quantity demanded or supplied.