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A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" will cost $147,500 and is expected to have a $52,500 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $17,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $13,000 per year. If the company's MARR is 15% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options. Calculate the future worth for the purchased alternative and leased alternative Future worth when purchased: $-220,152 Future worth when leased: $-230,454 A (в The clamshell should be purchased Future worth when purchased: $-172,252 Future worth when leased: $-222,830 The clamshell should be purchased Future worth when purchased: $-254,252 Future worth when leased: $-165,418 The clamshell should be leased Future worth when purchased: $-174,878 Future worth when leased: $-171,136 The clamshell should be leased

A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" will cost $147,500 and is expected to have a $52,500 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $17,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $13,000 per year. If the company's MARR is 15% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options. Calculate the future worth for the purchased alternative and leased alternative Future worth when purchased: $-220,152 Future worth when leased: $-230,454 A (в The clamshell should be purchased Future worth when purchased: $-172,252 Future worth when leased: $-222,830 The clamshell should be purchased Future worth when purchased: $-254,252 Future worth when leased: $-165,418 The clamshell should be leased Future worth when purchased: $-174,878 Future worth when leased: $-171,136 The clamshell should be leased

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" will cost $147,500 and is expected to have a $52,500 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $17,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $13,000 per year. If the company's MARR is 15% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options. Calculate the future worth for the purchased alternative and leased alternative Future worth when purchased: $-220,152 Future worth when leased: $-230,454 A B The clamshell should be purchased Future worth when purchased: $-172,252 Future worth when leased: $-222,830 The clamshell should be purchased Future worth when purchased: $-254,252 Future worth when leased: $-165,418 The clamshell should be leased Future worth when purchased: $-174,878 Future worth when leased: $-171,136 The clamshell should be leased
Transcribed Image Text:A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" will cost $147,500 and is expected to have a $52,500 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $17,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $13,000 per year. If the company's MARR is 15% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options. Calculate the future worth for the purchased alternative and leased alternative Future worth when purchased: $-220,152 Future worth when leased: $-230,454 A B The clamshell should be purchased Future worth when purchased: $-172,252 Future worth when leased: $-222,830 The clamshell should be purchased Future worth when purchased: $-254,252 Future worth when leased: $-165,418 The clamshell should be leased Future worth when purchased: $-174,878 Future worth when leased: $-171,136 The clamshell should be leased
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