Determine which option is preferred

Reference no: EM132168899

Question: VML Industries has need of specialized yarn manufacturing equipment for operations over the next 3 years. The firm could buy the machinery for $95,000 and depreciate it using MACRS. Annual maintenance would be $7500, and it would have a salvage value of $25,000 after 3 years. Another alternative would be to lease the same machine for $45,000 per year on an "all costs" inclusive lease (maintenance costs included in lease payment). These lease payments are due at the beginning of each year. VML Industries uses an after-tax MARR of 18% and a combined tax rate of 40%. Do an after-tax present worth analysis to determine which option is preferred.

Reference no: EM132168899

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