What is the fair rental amount

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Problem - Consider a processing center that can be purchased at $25000 today and will have a 10 years of useful lifetime, in the end of which the processing center is expected to have a salvage value of $5000. The annual maintenance costs are expected to start at $600 at the end of the first year, and each year thereafter, will increase by 5% compared to the previous year. Instead of owning this processing center, if we intend to lease it for 10 years at a constant annual rental, what is the fair rental amount under an 8% MARR that compounds annually?

Reference no: EM133018669

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