Rainbow Aviation needs an additional plane for five years. It could buy the plane for $360,000, using funds borrowed at 7.5% compounded monthly, and then sell the plane for an estimated $140,000 after five years. Alternatively, it could lease the plane for $5600, payable at the beginning of each month. Which alternative should Rainbow Aviation choose? What is the economic value of the financial advantage on the initial date of the preferred alternative?

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The Answer of Rainbow Aviation needs an additional plane for five years. It could buy the plane for $360,000, using funds borrowed at 7.5% compounded monthly, and then sell the plane for an estimated $140,000 after five years. Alternatively, it could lease the plane for $5600, payable at the beginning of each month. Which alternative should Rainbow Aviation choose? What is the economic value of the financial advantage on the initial date of the preferred alternative?

Rainbow Aviation Needs an Additional Plane for Five Years