A contractor is considering whether to buy or lease a new machine for her layout site work. Buying a new machine will cost $120,000, with a residual value of $12,000 after the machine's useful life of eight years. On the other hand, leasing requires an annual payment of $30,000, which occurs at the start of each year. MARR is 20%. On the basis of an internal rate of return analysis, which alternative should the contractor be advised to accept?
A contractor is considering whether to buy or lease a new machine for her layout site work. Buying a new machine will cost $120,000, with a residual value of $12,000 after the machine's useful life of eight years. On the other hand, leasing requires an annual payment of $30,000, which occurs at the start of each year. MARR is 20%. On the basis of an internal rate of return analysis, which alternative should the contractor be advised to accept?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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
Transcribed Image Text:A contractor is considering whether to buy or lease a new machine for her layout site work.
Buying a new machine will cost $120,000, with a residual value of $12,000 after the machine's
useful life of eight years. On the other hand, leasing requires an annual payment of $30,000,
which occurs at the start of each year. MARR is 20%. On the basis of an internal rate of return
analysis, which alternative should the contractor be advised to accept?
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