A construction firm needs a front-end loader. The loader can be leased from the dealer for 3 years for $8,700 per year including all maintenance, or it can be purchased for $32,000. The firm expects the loader to have a salvage value of $8,500 after 7 years. Maintenance will cost $650 in the first year and increase by $350 each year. The firm's interest rate is 8% per year. Express your answers to the nearest dollar. What is the EUAC for leasing the loader ($/year)? a b) C) What is the EUAC for purchasing the loader ($/year)? Which option is preferred (Lease or Buy)? ◆

A construction firm needs a front-end loader. The loader can be leased from the dealer for 3 years for $8,700 per year including all maintenance, or it can be purchased for $32,000. The firm expects the loader to have a salvage value of $8,500 after 7 years. Maintenance will cost $650 in the first year and increase by $350 each year. The firm's interest rate is 8% per year. Express your answers to the nearest dollar. What is the EUAC for leasing the loader ($/year)? a b) C) What is the EUAC for purchasing the loader ($/year)? Which option is preferred (Lease or Buy)? ◆

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

A construction firm needs a front-end loader. The loader can be leased from the dealer for 3 years for $8,700 per year including all maintenance, or it can be purchased
for $32,000. The firm expects the loader to have a salvage value of $8,500 after 7 years. Maintenance will cost $650 in the first year and increase by $350 each year.
The firm's interest rate is 8% per year. Express your answers to the nearest dollar.
What is the EUAC for leasing the loader ($/year)?
a)
b)
What is the EUAC for purchasing the loader ($/year)?
Which option is preferred (Lease or Buy)?

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