An independent contractor is trying to decide whether to lease new equipment now or save his money and purchase it in 5 years' time when he is able to fully pay for the equipment without interest. The cost of the equipment is $73,000 if leased or $85,000 if purchased 5 years from now. At a real MARR of 10% per year and an inflation rate of 4% per year, determine if the company should lease it now or wait and purchase later (a) without any adjustment for inflation and (b) with inflation considered.

An independent contractor is trying to decide whether to lease new equipment now or save his money and purchase it in 5 years' time when he is able to fully pay for the equipment without interest. The cost of the equipment is $73,000 if leased or $85,000 if purchased 5 years from now. At a real MARR of 10% per year and an inflation rate of 4% per year, determine if the company should lease it now or wait and purchase later (a) without any adjustment for inflation and (b) with inflation considered.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

2. An independent contractor is trying to decide whether to lease new equipment now or save his
money and purchase it in 5 years' time when he is able to fully pay for the equipment without
interest. The cost of the equipment is $73,000 if leased or $85,000 if purchased 5 years from
now. At a real MARR of 10% per year and an inflation rate of 4% per year, determine if the
company should lease it now or wait and purchase later (a) without any adjustment for inflation
and (b) with inflation considered.

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