Determining the approximate annual cost

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Reference no: EM13784532

Jonas Inc. is trying to decide whether to lease or purchase a piece of equipment needed for the next ten years. The equipment would cost $45,000 to purchase, and maintenance costs would be $5,000 per year. After ten years, Jonas estimates it could sell the equipment for $20,000. If Jonas leased the equipment, it would pay a set annual fee that would include all maintenance costs. Jonas has determined after a net present value analysis that at its hurdle rate of 10%, it would be better off by $5,700 if it buys the equipment. What would the approximate annual cost be if Jonas were to lease the equipment?

a. $9,000
b. $7,000
c. $12,000
d. $13,250

Reference no: EM13784532

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