A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shelI" will cost $147,500 and is expected to have a $40,000 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $10,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $15,000 per year. If the company's MARR is 19% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options. The future worth when purchased is $ -147563 The future worth when leased is $ The clamshell should be leased
A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the "shelI" will cost $147,500 and is expected to have a $40,000 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $10,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $15,000 per year. If the company's MARR is 19% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options. The future worth when purchased is $ -147563 The future worth when leased is $ The clamshell should be leased
Chapter19: Lease And Intermediate-term Financing
Section: Chapter Questions
Problem 2P
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