small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" ill cost $177,500 and is expected to have a $50,000 salvage value after 6 years. Alternatively, the company can lease a clamshell or 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 ill be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $10,000 per year. the company's MARR is 14% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? ssume the annual M&O cost is the same for both options. alculate the future worth for the purchased alternative and leased alternative A (в Future worth when purchased: $-172,252 Future worth when leased: $-222,830 The clamshell should be purchased Future worth when purchased: $-174,878 Future worth when leased: $-171,136 The clamshell should be leased Future worth when purchased: $-220,152 Future worth when leased: $-230,454 The clamshell should be purchased Future worth when purchased: $-254,252 Future worth when leased: $-165,418
small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shell" ill cost $177,500 and is expected to have a $50,000 salvage value after 6 years. Alternatively, the company can lease a clamshell or 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 ill be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $10,000 per year. the company's MARR is 14% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? ssume the annual M&O cost is the same for both options. alculate the future worth for the purchased alternative and leased alternative A (в Future worth when purchased: $-172,252 Future worth when leased: $-222,830 The clamshell should be purchased Future worth when purchased: $-174,878 Future worth when leased: $-171,136 The clamshell should be leased Future worth when purchased: $-220,152 Future worth when leased: $-230,454 The clamshell should be purchased Future worth when purchased: $-254,252 Future worth when leased: $-165,418
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Choose the correct answer.3.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education