Need formula to determine the following:

I could buy a car for 25,000 and sell it in 5 years for 5,000. Or I
can lease the car for 5 years for 5,000 per a year. The discount rate
is per year.

Would the formula for the sell portion of the question be 5000/1.12= 4.464.29 

25,000- 4,464.29 = 20,535.71?

Would the formula for the lease portion of the care be 5,000/1.12 +
5000/(1.12)^2 + 5,000/(1.12)^3+ 5.000/ (1.12)^4 + 5.000/ (1.12)^5 =
18, 559.71

Therfore buying a car would be a better option?

Baseball2 ?

Early in my finance career, I did virtually the same calculation ? the
difference being that we could depreciate the car or take the lease
payments as straight expense.  We decided to lease because the IRR was
so low that it was lower than our corporate cost-of-money.

Okay, with that side story aside, let?s go through the PURCHASE and
LEASE options and their discounted cash flow.    BTW, you have set the
problem up correctly ? except for the fact that leases are generally
paid IN ADVANCE ? so year 1 lease is $5,000/1 and year 2 is
$5,000/1.12, etc.

But first let?s do every year?s NPV factor before figuring the
discounted cash flow (DCF) for each option:

NPV FACTOR:

Year 0: 1
Year 1: 1/1.12 = 0.8929
Year 2: 1/(1.12)^2 = 0.7972
Year 3: 1/(1.12)^3 = 0.7118
Year 4: 1/(1.12)^4 = 0.6355
Year 5: 1/(1.12)^5 = 0.5674


DCF of PURCHASE

Year 0: -$25,000
Year 5: +$5,000 * 0.5674 = $2,337

===========================
DCF of PURCHASE = - $22,663
===========================



DCF of LEASE

Year 0: -$5,000
Year 1: -$5,000 * 0.8929 = -$4,465
Year 2: -$5,000 * 0.7972 = -$3,986
Year 3: -$5,000 * 0.7118 = -$3,559
Year 4: -$5,000 * 0.6355 = -$3,178

========================
DCF of LEASE = -$20,188
========================


As in the case of my analysis, the lease has a smaller negative number
and is more attractive.  However, note that this example excludes any
tax impact.

Best regards,

Omnivorous-GA

Once again, thank you for the excellent help!