A firm can lease a truck for 5 years at a cost of $49,000 annually. It can instead buy a truck at a cost of $99,000, with annualmaintenance expenses of $29,000. The truck will be sold at the end of 5 years for $39,000.a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%?Note: Do not round intermediate calculations. Round your answer to 2 decimal places.Answer is complete but not entirely correct.Equivalent annual costS35,501.30xb. Which is the better option?BuyLease

When the assets under consideration have different lives or different cash flow structures, the NPV…

Answered: A firm can lease a truck for 5 years at…

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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A firm can lease a truck for 4 years at a cost of $35,000 annually. It can instead buy a truck at a cost of $85,000, with annual maintenance expenses of $15,000. The truck will be sold at the end of 4 years for $25,000. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Equivalent annual cost b. Which is the better option? Lease O Buy
Your landscaping company can lease a truck for $9,000 a year (paid at year-end) for 7 years. It can instead buy the truck for $48,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%. a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Is it cheaper to buy or lease? c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Is it now cheaper to buy or lease?
Your landscaping company can lease a truck for $8,400 a year (paid at year-end) for 7 years. It can instead buy the truck for $44,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%. a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round your answer to 2 decimal places.) b. Is it cheaper to buy or lease? c. What is the present value of the cost of leasing if the lease payments are an annuity due, so the first payment comes immediately? (Do not round intermediate calculations. Round your answer to 2 decimal places.) d. Is it now cheaper to buy or lease? Your landscaping company can lease a truck for $8,400 a year (paid at year-end) for 7 years. It can instead buy the truck for $44,000. The truck will be valueless after 7 years. The interest rate your company can earn on its funds is 8%. a. What is the present value of the cost of leasing? (Do not round intermediate calculations. Round…
Deutsche Transport can lease a truck for four years at a cost of €38,000 annually. It can instead buy a truck at a cost of €88,000, with annual maintenance expenses of €18,000. The truck will be sold at the end of four years for €24,500. Ignore taxes. a. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 12%? Note: Do not round intermediate calculations. Enter your answer in euros. Round your answer to the nearest whole number. b. Which is the better option: leasing or buying? a. Equivalent annual cost b. Better option
A firm can lease a truck for 4 years at a cost of $38,000 annually. The lease includes maintenance. The firm can instead buy a truck at a cost of $88,000, with annual maintenance expenses of $18,000. The truck has no salvage value at the end of 4 years. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10% Round your answer to the nearest dollar and report it without the $ symboli
A fleet manager must choose between two trucks to purchase for a company's fleet. The company uses an interest rate of 6% and will keep either truck for 3 years. Truck A costs $29,000 and has a market value of $18,000 after 3 years. Truck B costs $33,000 and has a market value of $20,000 after 3 years. Determine the equivalent uniform annual cost (EUAC) for the truck the fleet manager should buy. Express your answer as a positive number is $ to the nearest $10.
Your landscaping company can lease a truck for $8,150.00 a year for 4 years. It can instead buy the truck for $23,388.56. The truck will be valueless after 4 years. a. What is the present value of the lease payments, If the interest rate your company can earn on its funds is 11.00%. (Do not round intermediate calculations. Round your answer to 2 decimal places.) Present value b. Is it cheaper to buy or lease? buy lease
Your company is planning to purchase a new loader for $20,937. If the company keeps the old loader, it will have $1,959 additional maintenance cost for the first year and increases $308 each year till the eighth year. Given the company's minimum attractive rate of return (MARR) is 6%, what is the present cost of keeping the old loader? 6% 1 2 3 4 5 879 6 9 Single Payment Compound Present Amount Worth Factor Factor Find F Find P Given F Given P F/P P/F 1.060 1.124 1.191 1.262 1.338 1.419 1.504 1.594 1689 .9434 .8900 .8396 .7921 .7473 .7050 .6651 .6274 5919 Sinking Fund Factor Find A Given F A/F 1.0000 .4854 3141 .2286 .1774 .1434 .1191 1010 0870 Compound Interest Factors Uniform Payment Series Capital Recovery Factor Find A Given P A/P 1.0600 .5454 .3741 .2886 2374 2034 .1791 1610 1470 Compound Amount Factor Find F Given A F/A 1.000 2.060 3.184 4.375 5.637 6.975 8.394 9.897 11 491 Present Worth Factor Find P Given A P/A 0.943 1.833 2.673 3.465 4.212 4.917 5.582 6.210 6.802 Arithmetic…
A forklift will last for only 4 more years. It costs $6,500 a year to maintain. For $20,000 you can buy a new lift that can last for 10 years and should require maintenance costs of only $3,500 a year. a-1. Calculate the equivalent cost of owning and operating the forklift if the discount rate is 4% per year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a-2. Should you replace the forklift? b-1. Calculate the equivalent cost of owning and operating the forklift if the discount rate is 14% per year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b-2. Should you replace the forklift? a-1. Equivalent cost a-2. Should you replace the forklift? b-1. Equivalent cost b-2. Should you replace the forklift? $ Yes $ No 23,594.51 18,256.40
A forklift will last for only 3 more years. It costs $6,000 a year to maintain. For $17,000 you can buy a new lift that can last for 8 years and should require maintenance costs of only $3,000 a year. a-1. Calculate the equivalent cost of owning and operating the forklift if the discount rate is 5% per year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. a-2. Should you replace the forklift? b-1. Calculate the equivalent cost of owning and operating the forklift if the discount rate is 12% per year. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. b-2. Should you replace the forklift? a-1. Equivalent cost a-2. Should you replace the forklift? b-1. Equivalent cost b-2. Should you replace the forklift?
Your storage firm has been offered $95,700 in one year to store some goods for one year. Assume your costs are $95,200, payable immediately, and the cost of capital is 8.2%. Should you take the contract? The NPV will be $ (Round to the nearest cent.) Should you take the contract? (Select from the drop-down menu.) The contract be taken.
Deutsche Transport can lease a truck for four years at a cost of €32,000 annually. It can instead buy a truck at a cost of €82,000, with annual maintenance expenses of €12,000. The truck will be sold at the end of four years for €21,500. Ignore taxes. What is the equivalent annual cost of buying and maintaining the truck if the discount rate is 10%? Note: Do not round intermediate calculations. Enter your answer in euros. Round your answer to the nearest whole number. Which is the better option: leasing or buying?

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