06. J. Timberlake Corporation needs a special manufacturing machine for its production plant. The company may purchase the machine for P500 000.00 and have it installed at a cost of P50 000.00. The machine will incur an annual cost of P35 000.00 for maintenance and repair, and is expected to be used for eight years and then sold for P50 000.00. The company may also rent the machine at P115 000.00 per year payable at the end of each year. If the machine is rented, costs of installation and repair shall be shouldered by the lessor, however a fee of P20 000.00 per year payable at the end of each year will be charged for basic maintenance. If the company requires an 11% MARR on its investments, determine the better alternative using PW analysis. (Ans. It is advantageous to rent, - P694 726.57; - P708 417.97) 07. Same as problem number 6 except that the lease requires that rent payment be given in advance (at the start of each year). (Ans. It will be advantageous to purchase,- P708 417.97;- P759 825.00)
06. J. Timberlake Corporation needs a special manufacturing machine for its production plant. The company may purchase the machine for P500 000.00 and have it installed at a cost of P50 000.00. The machine will incur an annual cost of P35 000.00 for maintenance and repair, and is expected to be used for eight years and then sold for P50 000.00. The company may also rent the machine at P115 000.00 per year payable at the end of each year. If the machine is rented, costs of installation and repair shall be shouldered by the lessor, however a fee of P20 000.00 per year payable at the end of each year will be charged for basic maintenance. If the company requires an 11% MARR on its investments, determine the better alternative using PW analysis.
(Ans. It is advantageous to rent, - P694 726.57; - P708 417.97)
07. Same as problem number 6 except that the lease requires that rent payment be given in advance (at the start of each year).
(Ans. It will be advantageous to purchase,- P708 417.97;- P759 825.00)
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