Exercises for M3

Rent Vs Buy
You are evaluating buying a new car that would cost Rs 3 lakhs and Rs 10 per km as running cost. Your friend sugge
per km. You want to do the analysis over 5-year period to know which option is better. You expect to travel 800 km

Please create an Excel model to arrive at the decision.

EMI
In previous exercise, it came out that buying a car would make more sense and you decide to buy it on EMI plan of
model in Excel to calculate the EMI amount using goalseek as well as PMT function.
Buy vs Rent

Purchase cost (INR) 300,000

Running cost / Km 10
Kms travelled per month 800
Kms travelled 48,000
Rent / Km 20

Total cost in Purchase Scenario 780,000

Total cost in Rent Scenario 960,000

Buying a car in this scenario makes more economic sense.

EMI

Loan amount 300000

i (p.a.) 10.0%
r 0.8%

Principal
Month outstanding Interest EMI
1 300,000 2,500 26,375 <- Apply goalseek on this cell to set cell C20 to
2 276,125 2,301 26,375
3 252,052 2,100 26,375
4 227,777 1,898 26,375
5 203,301 1,694 26,375
6 178,620 1,488 26,375
7 153,734 1,281 26,375
8 128,640 1,072 26,375
9 103,337 861 26,375
10 77,824 649 26,375
11 52,097 434 26,375
12 26,157 218 26,375
13 - 0

PMT ₹26,375
k on this cell to set cell C20 to 0
purchase cost 300000
running cost 10
kms per month 800
kms travelled 48000
rent/kms 20

purchase 780000

rent 960000
 o/s
principal at
months the INTEREST emi
beginning

1 300000 2500 0
2 302500 2521 0
3 305021 2542 0
4 307563 2563 0
5 310126 2584 0
6 312710 2606 0
7 315316 2628 0
8 317944 2650 0
9 320593 2672 0
10 323265 2694 0
11 325959 2716 0
12 328675 2739 0
13 331414
loan amt 300000
rate p.a. 10.0%
r 0.8%