A sheltered workshop requires a lift truck to handle pallets for a new contract. A lift truck can be purchased for Rs.2,70,000. Annual insurance costs are 3% of the purchase price, payable on the first of each year, an equivalent truck can be rented for Rs,15,000 per month payable at the end of each month. Operating costs are same for both the alternatives. For what minimum number of months must a purchased truck be used on the contract to make purchasing more attractive than leasing? Interest rate is 12% compounded monthly. Assume that the purchased truck has no salvage value.
A sheltered workshop requires a lift truck to handle pallets for a new contract. A lift truck can be purchased for Rs.2,70,000. Annual insurance costs are 3% of the purchase price, payable on the first of each year, an equivalent truck can be rented for Rs,15,000 per month payable at the end of each month. Operating costs are same for both the alternatives. For what minimum number of months must a purchased truck be used on the contract to make purchasing more attractive than leasing? Interest rate is 12% compounded monthly. Assume that the purchased truck has no salvage value.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A sheltered workshop requires a lift truck to handle pallets for a new contract. A lift truck can be purchased for Rs.2,70,000. Annual insurance costs are 3% of the purchase price , payable on the first of each year, an equivalent truck can be rented for Rs,15,000 per month payable at the end of each month. Operating costs are same for both the alternatives. For what minimum number of months must a purchased truck be used on the contract to make purchasing more attractive than leasing? Interest rate is 12% compounded monthly. Assume that the purchased truck has no salvage value. Solve using Formulas and draw cash flow diagram.
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