A firm can lease a truck for 4 years at a cost of $35,000 annually. It can instead buy a truck at a cost of $85,000, with annual maintenance expenses of $15,000. The truck will be sold at the end of 4 years for $25,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost b. Which is the better option? Lease O Buy
A firm can lease a truck for 4 years at a cost of $35,000 annually. It can instead buy a truck at a cost of $85,000, with annual maintenance expenses of $15,000. The truck will be sold at the end of 4 years for $25,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost b. Which is the better option? Lease O Buy
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question
![A firm can lease a truck for 4 years at a cost of $35,000 annually. It can instead buy a truck at a cost of $85,000, with annual
maintenance expenses of $15,000. The truck will be sold at the end of 4 years for $25,000.
a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Equivalent annual cost
b. Which is the better option?
Lease
O Buy](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F40c415ff-7276-441c-b197-8593b5cd5ef0%2Fd38049f1-8d3a-4e0d-96c0-10f4f6f6f4ac%2F31rjs9lq_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A firm can lease a truck for 4 years at a cost of $35,000 annually. It can instead buy a truck at a cost of $85,000, with annual
maintenance expenses of $15,000. The truck will be sold at the end of 4 years for $25,000.
a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%?
Note: Do not round intermediate calculations. Round your answer to 2 decimal places.
Equivalent annual cost
b. Which is the better option?
Lease
O Buy
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