Construction firm needs a new small loader

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Reference no: EM131806613

A construction firm needs a new small loader. It can be leased from the dealer for 3 years for $5500 per year including all maintenance, or it can be purchased for $20,000. The firm expects the loader to have a salvage value of $7000 after 7 years. The maintenance will be $500 the first year and then it will increase by $300 each year. The firm's interest rate is 12% per year. Compare the EUACs for leasing and buying the loader. Contributed by Hamed Kashani, Saeid Sadri, and Baabak Ashuri, Georgia Institute of Technology.

Reference no: EM131806613

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