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 $200,000, or you can lease a truck from the manufacturer for five years for a monthly lease payment of $4000 (paid at the end of each month). Your firm can borrow at 6% APR with quarterly compounding.

The effective annual rate on your firm's borrowings is closest to:

A) 6.00%
B) 6.24%
C) 6.17%
D) 6.14%

The monthly discount rate that you should use to evaluate the truck lease is closest to:

A) 0.487%
B) 0.512%
C) 0.498%
D) 0.500%

So then the best option for the first part would be:

D) 6.14%

So then the correct option for this case would be:

C) 0.498%

Explanation:

For this case we have the following info given:

PMT = represent the monthly payments on this case 4000

The upfront cost is 200000

APR= 6% = 0.06 quarterly

n = represent the numbe rof times that the interest is compounded at 1 year.

We assume that for this case we have compounded interest.

We can calculate the effective annual rate with the following formula:

And if we replace we got:

So then the best option for the first part would be:

D) 6.14%

Now for the second part we need to calculate the discount rate that you should use to evaluate the truck lease, so we can use the monthly rate formula given by:

So then the correct option for this case would be:

C) 0.498%

what are the sentences? so we can answer the question.

a manufacturer of printed circuit boards uses exponential smoothing with trend to forecast monthly demand of its product. at the end of december, the company wishes to forecast sales for january. the estimate of trend through november has been 200 additional boards sold per month. average sales have been around 1000 units per month. the demand for december was 1100 units. the company uses α = 0.20 and β = 0.10. make a forecast including trend for the month of january.