construction company had a number of projects and needed to a construction equipment to be used for five years. The company had two choices: the first one included buying the equipment with a price of $50,000; the operation and repair cost is $2,000 a year, and the salvage value is $10,000 at the end of the fifth year. The second option comprised renting the required equipment with amount of $8,000 a year, which is usually paid
construction company had a number of projects and needed to a construction equipment to be used for five years. The company had two choices: the first one included buying the equipment with a price of $50,000; the operation and repair cost is $2,000 a year, and the salvage value is $10,000 at the end of the fifth year. The second option comprised renting the required equipment with amount of $8,000 a year, which is usually paid
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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A construction company had a number of projects and needed to a
construction equipment to be used for five years. The company had two choices: the
first one included buying the equipment with a price of $50,000; the operation and
repair cost is $2,000 a year, and the salvage value is $10,000 at the end of the fifth
year. The second option comprised renting the required equipment with amount of
$8,000 a year, which is usually paid at the begging of each year and needs $3,000 a
year for operation and repair. Specify which option is better for the company? The
interest rate is 6%.
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