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What would be the book values for the equipment

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Reference no: EM133146934

Question - A contractor needs to acquire a crane. A new crane costs $300,000. Repairs are expected to be $30,000 per year. The machine will be sold for an estimated salvage value of $100,000 at the end of five years. As an alternative, the contractor could lease a similar crane for $8,000 per month.

a. Should the contractor purchase or lease? Annual operating costs are approximately the same for both alternatives. Use a minimum attractive rate of return (interest rate) of 12%.

b. If the contractor decide to purchase the crane, what would be the book values for the equipment at the end of each year if the straight-line depreciation method is used?

c. If the contractor decide to purchase the crane, what would be the book values for the equipment at the end of each year if the sum-of-the-years depreciation method is used?

Reference no: EM133146934

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