A firm is considering whether to purchase or lease land-moving equipment. The data associated with the purchase are as follows Initial cost = $150,000 Residual value = $12,000 Maintenance cost = $1,800/per year Operator cost per day = $300/day If the equipment is rented, the operator cost is incurred, at the rate of $300 per day and $100 for the daily rental of the equipment. Determine the minimum number of days per year the equipment must be used to justify the purchase. Use an interest rate of 7%. Life = 10 years

A firm is considering whether to purchase or lease land-moving equipment. The data associated with the purchase are as follows Initial cost = $150,000 Residual value = $12,000 Maintenance cost = $1,800/per year Operator cost per day = $300/day If the equipment is rented, the operator cost is incurred, at the rate of $300 per day and $100 for the daily rental of the equipment. Determine the minimum number of days per year the equipment must be used to justify the purchase. Use an interest rate of 7%. Life = 10 years

Managerial Economics: A Problem Solving Approach

5th Edition

ISBN:9781337106665

Author:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Chapter3: Benefits, Costs, And Decisions

Section: Chapter Questions

Problem 8MC

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