Foster Incorporated is trying to decide whether to lease or purchase a piece of equipment needed for the next 10 years. The equipment would cost $50,000 to purchase, and maintenancecosts would be $5,000 per year. After 10 years, Foster estimates it could sell the equipment for $21,000. If Foster leases the equipment, it would pay $19,000 each year, which would includeall maintenance costs. If Foster's cost of capital is 9%, Foster should: (Future Value of $1, Present Value of $1, Future Value Annuity of $1, Present Value Annuity of $1)Note: Use the appropriate factors from the PV tables.Multiple Choicelease the equipment, as the net present value of the cost is about $45,000 less.buy the equipment, as the net present value of the cost is about $48,700 less.lease the equipment, as the net present value of the cost is about $48,700 less.buy the equipment, as the net present value of the cost is about $50,000 less.

Net Present Value or NPV is a capital budgeting technique used by investors in their decision making…

Answered: Foster Incorporated is trying to decide…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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