The equipment be required to just break even

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Reference no: EM132045106

Alfred Home Construction is considering the purchase of five dumpsters and a transport truck to store and transfer construction debris from building sites. The entire rig is estimated to have an initial cost of $125,000, a life of 8 years, a S5000 salvage value, an operating cost of $40 per day, and an annual maintenance cost of $2000. Alternatively, Alfred can obtain the same services from the city as needed at each construction site for an initial delivery cost of S125 per dumpster per site and a daily charge of $20 per day per dumpster. An estimated 45 construction sites will need debris storage throughout the average year. The minimum attractive rate of return is 12% per year. (a) How many days per year must the equipment be required to just break even? (b) If the expected usage is 75 days per year, which option-buy or lease-should be selected based on this economic analysis? Determine the expected annual cost of this decision.

Reference no: EM132045106

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