Location A Location B First cost, $ - 15,000 -18,000 Annual lease cost, $ per year -3,500 -3,100 Deposit return, $ 1,000 2,000 Lease term, years 6 9.
Location A Location B First cost, $ - 15,000 -18,000 Annual lease cost, $ per year -3,500 -3,100 Deposit return, $ 1,000 2,000 Lease term, years 6 9.
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
Related questions
Question
A project engineer with EnvironCare is assigned to start up a new office in a city where a 6-year contract has been finalized to collect and analyze ozone-level readings. Two lease options are available, each with a first cost, annual lease cost, and deposit-return estimates shown below. The MARR is 15% per year.
a. EnvironCare has a practice of evaluating all projects over a 5-year period.
If the deposit returns are not expected to change, which location should be
selected?
b. Perform the analysis using an 8-year planning horizon.
c. Determine which lease option should be selected on the basis of a present worth comparison using the LCM.
Transcribed Image Text:Location A
Location B
First cost, $
- 15,000
-18,000
Annual lease cost, $ per year
-3,500
-3,100
Deposit return, $
1,000
2,000
Lease term, years
6
9.
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