You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $10,400 per year if you sign a guaranteed 5-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed here: (the equipment has an economic life of 5 years). If your discount rate is 7.3%, what should you do? The net present value of the leasing alternative is $ The net present value of the buying alternative is $ (Round to the nearest dollar.) (Round to the nearest dollar.) What should you do? (Select from the drop-down menus.) The cost of is less, so you should the equipment.
You need a particular piece of equipment for your production process. An equipment-leasing company has offered to lease the equipment to you for $10,400 per year if you sign a guaranteed 5-year lease (the lease is paid at the end of each year). The company would also maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain the equipment yourself. The cash flows from doing so are listed here: (the equipment has an economic life of 5 years). If your discount rate is 7.3%, what should you do? The net present value of the leasing alternative is $ The net present value of the buying alternative is $ (Round to the nearest dollar.) (Round to the nearest dollar.) What should you do? (Select from the drop-down menus.) The cost of is less, so you should the equipment.
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
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Transcribed Image Text:You need a particular piece of equipment for your production process. An equipment-leasing
company has offered to lease the equipment to you for $10,400 per year if you sign a
guaranteed 5-year lease (the lease is paid at the end of each year). The company would also
maintain the equipment for you as part of the lease. Alternatively, you could buy and maintain
the equipment yourself. The cash flows from doing so are listed here: (the equipment
has an economic life of 5 years). If your discount rate is 7.3%, what should you do?
The net present value of the leasing alternative is $
The net present value of the buying alternative is $
(Round to the nearest dollar.)
(Round to the nearest dollar.)
What should you do? (Select from the drop-down menus.)
The cost of
is less, so you should
the equipment.
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