Purchased or leased on the basis of future worth analysis

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Reference no: EM131974840

A small strip-mining coal company is trying to decide whether it should purchase or lease a new clamshell. If purchased, the “shell” will cost $165,000 and is expected to have a $35,000 salvage value after 6 years. Alternatively, the company can lease a clamshell for only $20,000 per year, but the lease payment will have to be made at the beginning of each year. If the clamshell is purchased, it will be leased to other strip-mining companies whenever possible, an activity that is expected to yield revenues of $14,000 per year. If the company’s MARR is 18% per year, should the clamshell be purchased or leased on the basis of a future worth analysis? Assume the annual M&O cost is the same for both options.

The future worth when purchased is $

The future worth when leased is $

Reference no: EM131974840

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